Protecting Medicaid Beneficiaries Against Impermissible Fraud and Abuse Sanctions
This guidance restricts states from imposing recoupments for overpayments caused by beneficiary error or fraud, and lock-outs from Medicaid participation unless explicitly authorized by federal law. It emphasizes statutory protections for Medicaid beneficiaries, requiring states to provide advance notice and an opportunity for a fair hearing before taking any adverse action.
Medicaid law does not explicitly prohibit states from taking these actions; instead, it focuses on ensuring procedural safeguards. These requirements are rooted in Section 1902(a)(3) of the Social Security Act, which mandates that state Medicaid plans must:
"[P]rovide for granting an opportunity for a fair hearing before the State agency to any individual whose claim for medical assistance under the plan is denied or is not acted upon with reasonable promptness."
By interpreting federal law to restrict recoupments and lock-outs, the guidance significantly limits states’ flexibility to combat Medicaid fraud and abuse. By framing these practices as impermissible unless explicitly allowed, CMS is not interpreting existing federal law, which is the purpose of guidance, but instead narrowing the options available to states, and discouraging enforcement even where federal law is silent or ambiguous, which amounts to a significant policy change.
Additionally, CMS issued the guidance without following the notice-and-comment rulemaking process required by the Administrative Procedure Act (APA) for substantive policy changes. The APA mandates transparency and public input when creating new obligations or altering existing practices. By bypassing these procedural requirements, CMS undermines accountability and the rule of law.
This guidance could severely limit states’ ability to address Medicaid fraud and abuse, eroding program integrity and creating operational challenges. States must carefully assess the legal risks and potential disruptions posed by this guidance, which lacks statutory clarity and procedural compliance.
