Freedom Foundation

Center for Medicaid Services warns states to stop union dues skimming from Medicaid

Today, the federal Centers for Medicare and Medicaid Services (CMS) issued an informational bulletin reminding states that sending funds meant for Medicaid providers to third parties violates federal law.

The move is the latest step in the federal government’s effort to crack down on states that illegally deduct union dues and political contributions from payments to home caregivers serving Medicaid-eligible disabled and elderly clients.

Earlier this summer, CMS formally repealed an Obama administration regulation adopted in 2014 that purported to allow such deductions because it conflicted with a federal statute requiring states to pay Medicaid providers directly and in full for their services. The Freedom Foundation supported the regulation’s repeal and has advocated for the administration to take action since 2017.

Following the regulation’s repeal, however, a coalition of states and unions filed suit against CMS, alleging it didn’t repeal the regulation appropriately and that, in any event, the statute does not prevent states from skimming union dues from Medicaid payments.

The Freedom Foundation and National Right to Work Legal Defense Foundation jointly represent a coalition of West Coast caregivers seeking to help defend CMS’ position.

Today’s notice, however, suggests CMS does not intend to wait for the litigation to conclude, a process that could take years, before initiating enforcement actions against states that continue to violate the law. The notice states:

“CMS will create a process to allow states to assure that payments are made in accordance with 42. C.F.R § 447.10. We remind states of their responsibility to ensure the proper and efficient administration of their Medicaid program. To the extent necessary, CMS will use its enforcement mechanisms which could include deferrals, disallowances or compliance actions to recoup federal funds as appropriate. We expect that all states are adhering to program requirements and monitoring compliance.”

A Freedom Foundation report released in 2018 found that California, Connecticut, Illinois, Massachusetts, Minnesota, Oregon, Vermont and Washington deducted nearly $150 million in union dues from Medicaid payments to more than 350,000 caregivers in 2017 alone.

Given the immense amount of money the scheme produces for unions like SEIU and AFSCME and the close political ties these unions share with left-leaning state governments, it is unlikely that the affected states will voluntarily cease their improper diversion of Medicaid funds to unions, so today’s notice by CMS is an important step forward.