Submitted electronically to

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1 Submitted electronically to Centers for Medicare & Medicaid Services Department of Health & Human Services Attention: CMS-2413-P PO Box 8016 Baltimore, MD RE: CMS-2413-P Ladies and Gentlemen: The American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) submits these comments on the rule proposed in 83 Fed. Reg (July 12, 2018). The AFL-CIO is a federation of 55 national and international labor organizations with a total membership of over 12 million working men and women. Several of those affiliated labor organizations represent individual providers of Medicaid services and all of those labor organizations represent working people whose family members are beneficiaries of those services. The AFL-CIO urges the Department to reject the proposed rule for the following reasons. I. Congress Did Not Intend to Prohibit States from Honoring Providers Direction to Use a Portion of Their Payments to Satisfy the Providers Designated Obligations The proposal is wholly inconsistent with the clear congressional intent underlying the statutory provision. That intent is made plain by the legislative history and that intent was limited to prohibiting the practice of factoring, i.e., the sale of claims to third parties who were then involved in making claims for payment from the states and thereby driving up states costs. The authorized payments to third parties at issue here for health and welfare benefits, contributions, training costs, and other costs customary for employees do not involve factoring in any way as no one other than the providers makes any claims for compensation. 79 Fed. Reg. 2948, 3001 (Ja. 16, 2014).

2 Page 2 The legislative history of the 1972 amendments to the Social Security Act make plain that outlawing factoring was the sole purpose of the statutory language at issue. The Senate Report on the amendments explains: The law is silent with respect to reassignment by physicians or others who provide services of their right to receive payment under these programs. The Department of Health, Education, and Welfare makes such reassigned payments under Medicare without specific legislative authority. Experience with this practice under these programs shows that some physicians and other persons providing services reassign their rights to other organizations or groups under conditions whereby the organization or group submits claims and receives payment in its own name. Such reassignments have been a source of incorrect and inflated claims for services and have created administrative problems with respect to determinations of reasonable charges and recovery of overpayments. Fraudulent operations of collection agencies have been identified in Medicaid. Substantial overpayments to many such organizations have been identified in the Medicare program, one involving over a million dollars. S. Rep at 205 (1972) (emphasis added). The Committee made clear that the prohibition in what is now 42 U.S.C. 1396a(a)(32) was aimed solely at the described practice. The committee concurs with a provision in the House bill which seeks to overcome these difficulties by prohibiting payment under these programs to anyone other than the patient, his physician, or other person who provided the service. S. Rep at 205 (1972) (emphasis added). When the statutory language was revised in 1977 to add a clarification concerning the use of powers of attorney, Congress again made clear that its sole aim in introducing the original language in 1972 was to prohibit factoring. The House Report states unambiguously, The Committee s bill would modify existing law to preclude the use of a power of attorney as a device to circumvent the existing ban on the use of factoring arrangements in connection with the payment of claims by the Medicare and Medicaid programs. H.R. Rep No (II) at 48 (1977) (emphasis added). The Committee further explained the purpose of the original prohibition: In 1972, the Congress took action to stop a practice under which some physicians and other persons providing services under Medicare and Medicaid reassigned their Medicare and Medicaid receivables to other organizations or groups. Under the conditions of these reassignments, the organizations or groups purchased the receivables for a percentage of their face value, submitted claims and received payments in their name. By 1972, it had become apparent that such reassignments were a significant

3 Page 3 source of incorrect and inflated claims for services paid by Medicare and Medicaid. In addition, cases of fraudulent billings by collection agencies and substantial overpayments to these so-called factoring agencies were also found. Congress concluded that such arrangements were not in the best interest of the government or the beneficiaries served by the Medicare and Medicaid programs. Id. at (emphasis added). The amendments to the original prohibition were intended solely to close a loophole in the prohibition of factoring. Despite these efforts to stop factoring of Medicare and Medicaid bills, some practitioners and other persons have circumvented the intent of the law by use of a power of attorney. The use of a power of attorney allows the factoring company to receive the Medicare or Medicaid payment in the name of the physician, thus allowing the continuation of program abuses which factoring activities were shown to produce in the past. The bill would modify existing law to preclude the use of a power of attorney as a device for reassignments of benefits under Medicare and Medicaid. Id. at 49 (emphasis added). The Committee repeatedly described the statutory provision as limited to factoring arrangements and merely a ban on factoring arrangements. Id. The Senate Report similarly made clear that the 1977 amendments were intended to close a loophole in the ban on factoring. Your committee s bill clarifies existing law to insure that a power of attorney cannot be used to circumvent the prohibition in existing law against the use of factoring arrangements in connection with the payment of provider claims by the Medicare and Medicaid programs. S. Rep. No at 6 (1977) (emphases added). Just like the House Committee, the Senate Committee clearly described the purpose of the 1972 amendments as prohibiting factoring that involve a third party making claims after reassignment from a provider with a consequent risk of false and inflated claims. Until now, the Department of Health and Human Services and the Centers for Medicare & Medicaid Services have similarly read the prohibition as intended solely to stop factoring. The 1978 regulations that implemented the statutory prohibition contained only one express, specific prohibition: Payment for any service furnished to a recipient by a provider many not be made to or through a factor, either directly or by power of attorney. 43 Fed. Reg ( (h)) (Sept. 29, 1978). The regulations defined a factor as an individual or an organization, such as a collection agency or service bureau, that advances money to a provider for accounts receivable that the provider has assigned, sold or transferred to the individual organization for an added fee

4 Page 4 or a deduction of a portion of the accounts receivable. 43 Fed. Reg ( (b)) (Sept. 29, 1978). The Centers for Medicare & Medicaid Services observed in its 2012 NPRM, The statutory direct payment provision was intended to address the issue of factoring. 77 Fed. Reg , (May 3, 2012) (emphasis added). Finally, the federal courts have agreed that the purpose of the statutory prohibition is to prevent factoring. The United States Court of Appeals for the Fifth Circuit has found, An examination of the legislative history of this provision reveals that its purpose was to prevent factoring agencies from purchasing Medicare and Medicaid accounts receivable at a discount and then serving as the collection agency for the accounts. In Re Missionary Baptist Foundation of America, Inc., 796 F.2d 752, 757 n. 6 (5th Cir. 1986) (emphasis added). Congress intended to prohibit factoring. It did not intend to prohibit the provider authorized payment to third parties at issue here for health and welfare benefits, contributions, training costs, and other costs customary for employees. The latter does not involve third parties making claims for payment for services on the states and thus does not involve the risk of inflated and fraudulent claims that underlay the prohibition of factoring. II. The Proposed Change Would Effectively Decrease Providers Compensation and Harm Beneficiaries In addition to conflicting with clear congressional intent, the Department s proposed reinterpretation of 42 U.S.C. 1396a(a)(32) interferes with individual practitioners access to affordable and efficient forms of health, retirement, training and other benefits. This will inflict harm on home care workers and others who are individual providers for Medicaid beneficiaries, as well as on beneficiaries themselves who are counting on these providers for skilled care. Benefits provided through work whether the state pays for them or merely facilitates payment are a highly effective way for working people to get health, retirement and other protections and access to job training that improves their futures. By creating economies of scale and efficient enrollment and delivery mechanisms, benefits delivered through a job allow workers to get more in benefits than they could otherwise afford and make it much more likely they will be enrolled in benefit programs than if they were forced to do it all on their own. In promulgating the 2014 amendment to the rule, the Department acknowledged the importance of facilitating access to benefits through work, stating, Indeed, there may be cost savings resulting from the collective purchase of such benefits and greater workforce stability. 79 Fed. Reg. 2948, 3002 (Ja. 16, 2014). The Department stated further, For the classes of practitioners for whom the state is the only or primary payer, these payment arrangements are an efficient and effective method for ensuring that the workforce has health and welfare benefits and adequate training for their functioning. Id.

5 Page 5 Benefits provided through work are also an essential component of a good job and are critical to building and maintaining a stable, qualified workforce. High participation rates in health, retirement and other benefit plans offered through work demonstate this, as does extensive survey research on what workers value in a job. For example, the most recent EBRI/Greenwald & Associates Health and Workplace Benefits Survey finds, [H]ealth benefits play a key role in whether to remain at a job or choose a new job with 83 percent say[ing] that health insurance is very or extremely important in deciding whether to stay in or change jobs. 1 In adding paragraph (4) to 42 C.F.R (g), the Department recognized that ensuring a stable, high-performing workforce is a critical Medicaid program objective. Personal care services and other program segments have suffered from instability to the detriment of beneficiaries, and facilitating access to training and benefits is a valuable tool to address this program weakness. The Department stated, CMS has long sought to ensure maximum state flexibility to design state-specific payment methodologies that help ensure a strong, committed, and well-trained work force. Currently, certain categories of Medicaid covered services, for which Medicaid is a primary payer, such as personal care services, suffer from especially high rates of turnover and low levels of participation. We believe the proposed provider payment reassignment provision retained in the final rule will provide to states additional tools to help foster a stable and high performing workforce. 79 Fed. Reg. at The Department further explained the importance of this policy to the objective of ensuring access for Medicaid beneficiaries to individual providers, stating, Direct payment of funds by states to third parties on behalf of practitioners, to ensure benefits that support those practitioners and provide skills training, may help ensure that beneficiaries have greater access to such practitioners and higher quality services. Id. at Barring states from incorporating these kinds of payment arrangements into their programs, as the Department proposes, will harm individual providers and place added stress on Medicaid beneficiaries. This action by the Department will deny workers, whose wages are already low and whose jobs are difficult and demanding, easy access to training and benefits and make those workers pay more to get such benefits on their own. In turn, beneficiaries who want to live independently in their own homes and direct the hiring of their care providers will find it more and more difficult to hire and keep skilled workers. 1 Paul Fronstin and Lisa Greenwald, The State of Employee Benefits: Findings from the 2017 Health and Workplace Benefits Survey, EBRI Issue Brief No. 448 (Apr. 10, 2018), p. 12, available at

6 Page 6 Conclusion For the above-stated reasons, the AFL-CIO urges the Department not to adopt the proposed regulation. Very truly yours, /s/ Craig Becker Craig Becker General Counsel /s/ Shaun O Brien Shaun O Brien Asst. Policy Dir. for Health & Retirement