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Our attorneys stay on top of changes in legislation, agency regulations, case law, and industry trends—then craft timely legal alerts to keep clients up to date on legal developments important to their business.

July 27, 2021

American Rescue Plan Act: Initial New York State Spending Plan, New York State Then Subverts Federal Assurances

Under the American Rescue Plan Act (ARPA), New York State expects to receive an additional $2.15 billion through a 10 percent increase in the Federal Medical Assistance Percentage (FMAP) in various state Medicaid expenditures for home and community-based services (HCBS) for the period April 1, 2021, through March 31, 2022. Federal guidance through a state Medicaid directors letter (SMDL) provides that to be eligible, states must match the funding and provide several assurances to the Centers for Medicare & Medicaid Services (CMS). On July 8, 2021, the Department of Health (DOH) submitted an initial spending plan to CMS to expend funds for 43 proposals across three categories under multiple state agencies: supporting and strengthening the direct care workforce, building HCBS capacity through innovational systems transformation, and investing in digital infrastructure. States may expend these funds any time before March 31, 2024.

Under the plan, DOH assured CMS:

Until these enhancement funds are spent, DOH hereby affirms that it will adhere to the program requirements outlined by the Centers for Medicare & Medicaid Services (CMS) in the SMDL. . . .

DOH further affirms that it will demonstrate compliance with the requirement not to supplant existing state funds expended for Medicaid HCBS, as outlined in the SMDL by not imposing stricter eligibility standards, methodologies, or procedures for HCBS programs and services that were in place on April 1, 2021; preserving covered HCBS, including the services themselves, and the amount, duration, and scope of those services, in effect as of April 1, 2021; and maintaining HCBS provider payments at a rate no less than those in place as of April 1, 2021.

Subverting these assurances in the July 14 NYS Register, a DOH Notice of Adoption of regulations was published that reduces Medicaid reimbursement for residential habilitation services by individual residential alternative (IRA) providers. In the Assessment of Public Comment, DOH stated its strained view that the ARPA and the assurances do not preclude implementation of pending reimbursement cuts:

This provision does not prevent implementation of the proposed regulations. These proposed regulations are the final implementation of OPWDD’s most recent amendment to its 1915(c) Comprehensive HCBS Waiver, which was approved by the Centers for Medicare and Medicaid Services (CMS) with an effective date of October 1, 2020, well before the enactment of ARPA in March of 2021. The actions in these proposed regulations were drafted and approved under deliberations that did not and could not include the ARPA funds. ARPA funds will, in fact, supplement the level of state funds as the funds related to these actions were already set when ARPA was enacted.

And in a further response stated:

OPWDD concluded that by targeting payments for the nondelivery of services rather than implementing reductions to rates paid for services delivered, OPWDD would best be able to preserve essential community-based services while also achieving the required budget savings.

These conclusory statements by DOH lack foundation and will surely be challenged in litigation.

Members of Barclay Damon’s Health Care Controversies and Health & Human Providers Services Practice Areas continue to monitor any future developments and can assist clients to access funding and to litigate state initiatives that violate the assurances. Barclay Damon’s Health Care Controversies team has been at the forefront of reimbursement challenges and litigation and will be reviewing and reporting on these developments in future alerts. 

If you have any questions regarding the content of this alert, please contact; Eugene Laks, of counsel, at; Linda Clark, Health Care Controversies Practice Area chair, at; Melissa Zambri, Health & Human Services Providers Practice Area co-chair, at; Susan Benz, Health & Human Services Providers Practice Area co-chair, at; or another member of the firm’s Health Care Controversies or Health & Human Services Providers Practice Areas.

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