Freedom Foundation

Latest House COVID-19 package aims to protect union dues skimming from Medicaid

On Tuesday, the latest COVID-19 legislation, dubbed the “Health and Economic Recovery Omnibus Emergency Solutions Act” (the HEROES Act), was introduced in the U.S. House of Representatives.

House leadership has scheduled the massive, 1,815-page package for a vote on Friday.

As often happens with large, “must-pass” emergency legislation, the law contains special interest giveaways with little relation to the COVID-19 crisis.

Of particular concern to the Freedom Foundation, the law seeks to block a regulation proposed by the Department of Health and Human Services (HHS) that would help ensure states don’t skim union dues out of Medicaid payments to home caregivers serving Medicaid-eligible clients.

Specifically, Sec. 30102 of the bill prohibits HHS from “(taking) any action” to “finalize or otherwise implement” a package of regulatory changes it proposed in November 2019 to better ensure Medicaid funds are used appropriately.

Among the changes, HHS proposed to create a new regulation, 42 CFR § 447.207, which would require that the methods states use to pay Medicaid providers, “…permit the provider to receive and retain the full amount of the total computable payment for [Medicaid] services furnished…”

HHS explained, correctly, that the new regulation “is intended to implement” 42 U.S.C. § 1396a(a)(32), which requires that no payments for Medicaid care or services “…shall be made to anyone other than such individual or the person or institution providing such care or service…”

This is the statute the Freedom Foundation discovered in 2017 and that, we believe, prohibits states like Washington, Oregon and California from withholding union dues from Medicaid payments to home care providers, a lucrative, $150 million-per-year enterprise for unions like SEIU and AFSCME. HHS agreed and adopted the same view in a different regulation finalized in May 2019. In response, several unions and politically aligned state governments filed suit against HHS last summer, arguing the law doesn’t really restrict them from diverting Medicaid funds meant for providers to third-party special interest groups. The litigation is ongoing.

Effectively, 42 CFR § 447.207 would be the other side of the coin to 42 U.S.C. § 1396a(a)(32); the latter requires states to pay only Medicaid providers for their service, while the former would require that providers receive the full amount they are owed.

But because the regulation would help enforce existing law and further prevent states from steering Medicaid funds to their political allies, the same coalition of liberal state governments and unions benefiting from the practice are trying to stop it surreptitiously via the latest COVID-19 relief bill.

And lest there be any doubt about the degree to which state officials are in bed with unions like SEIU, a quick comparison of the formal comments submitted to HHS in January in opposition to the rule shows that the attorneys general of California (Xavier Becerra), Connecticut (William Tong), Illinois (Kwame Raoul), Massachusetts (Maura Healey), Oregon (Ellen Rosenblum), and Washington (Bob Ferguson) literally copied SEIU’s comments verbatim.

For instance, other than the first few words, the below paragraphs in both comments are identical:

SEIU Comment

State AGs’ Comment

We are concerned that CMS may intend to not only prohibit inappropriate IGT and other financing arrangements through the proposed addition of 42 C.F.R. § 447.207, but also to incorporate CMS’s recent interpretation of the anti-reassignment provision, to prohibit standard, voluntary payroll deductions for customary employee benefits such as health and dental insurance, skills training, and voluntary union dues. See 84 Fed. Reg. 19718; 84 Fed. Reg. at 63746 (“[p]ayment arrangements that comply with an exception in section 1902(a)(32) of the Act and the implementing regulation in § 447.10 would not be deemed out of compliance”). As you are surely aware, the legality of that rulemaking, and of CMS’s strained interpretation of Section (a)(32), is being challenged in federal court. See California v. Azar, Case No. 3:19-cv-02552-VC (N. D. Cal., May 13, 2019). The parties’ briefing on cross-motions for summary judgment is nearly complete, and the court will hear the matter on February 12, 2020. CMS should not seek to circumvent an impending court ruling by promulgating a second regulation based in part on the same legal theory that is currently under judicial review. That would be improper. The proposed modifications to 42 CFR § 447.207 should certainly not be implemented during the pendency of the California v. Azar lawsuit… The proposed modification to 42 C.F.R. § 447.207 could be construed to incorporate CMS’s recent interpretation of Section (a)(32), the Medicaid Act’s anti-reassignment provision, to prohibit standard, voluntary payroll deductions for customary employee benefits such as health and dental insurance, skills training, and voluntary union dues. See 84 Fed. Reg. 19,718 (May 6, 2019) (rescinding 42 C.F.R. § 447.10(g)(4)); 84 Fed. Reg. at 63,746 (“[p]ayment arrangements that comply with an exception in section 1902(a)(32) of the Act and the implementing regulation in § 447.10 would not be deemed out of compliance”). As you are surely aware, the legality of that rulemaking, and of CMS’s strained interpretation of Section (a)(32), is being challenged in federal court. See California v. Azar, Case No. 3:19-cv-02552-VC (N. D. Cal., May 13, 2019). The parties’ briefing on cross-motions for summary judgment is nearly complete, and the court will hear the matter on February 12, 2020. CMS should not seek to circumvent an impending court ruling by promulgating a second regulation based in part on the same legal theory that is currently under judicial review. That would be improper. The proposed modifications to 42 CFR § 447.207 should not be implemented during the pendency of the California v. Azar lawsuit.

And both comments were submitted on the same day, January 31.

If all this seems complicated, that’s because it is. Medicaid is one of the most regulated and bureaucratic programs in existence.

But the fact that unions and the politicians that rely on them want to block regulations meant to protect Medicaid from fraud and abuse using language buried in a COVID-19 emergency bill shows just how far those opposed to individual liberty and government accountability are willing to go to protect their own illegal, but lucrative, racket.