U.S. Federal Law prevents payments to providers by Medicaid from being diverted to third parties unless such diversions are a requirement of the provider’s employment. This was enacted to prevent others from “garnishing” such payments and reducing the amount being ultimately paid to the provider for services rendered. The Law does provide for third-party payments to be made for wage garnishments as the result of a legal judgment against the employee, child support orders, and judgments for debts owed to states such as tax liens.
In 2014, the U.S. Supreme Court (SCOTUS) upheld this to mean that “compulsory union payments violate the First Amendment rights of home health care workers (including those who are Medicaid providers) who prefer not to support union activities.” This essentially confirmed that such “compulsory union payments” are payments to third parties as restricted and prohibited by § 1902 of the Social Security Act.
Despite the wording of the Law and the SCOTUS ruling, the administration for then-President Barack Obama in 2014 provided an unlegislated exception that allowed for such third-party payments to be withheld by labor unions. According to the National Right to Work Legal Defense Foundation, this forced employees in more than a dozen non-right-to-work states to have their payments reduced as “compulsory union payments” were taken from the Medicaid payments to the providers. This amounted to $200 million annually for unions – or almost $1 billion total as the rule remained unchallenged and in force until a 2018 rule from the administration of then-President Donald Trump removing this exception – according to the State Policy Network.
With no changes having been made to the Law or to the SCOTUS ruling, President Joe Biden’s administration wishes now to reinstate the rule from the Obama Administration. Cited as Document 86 FR 41803 in the Federal Register, the new rule proposed by the Centers for Medicare & Medicaid Services (CMS) of the U.S. Department of Health & Human Services (HHS) and submitted on August 3, 2021, the proposed rule would resume forced payments to labor unions of Medicaid proceeds earned by providers, regardless of the providers’ wishes or agreement with the labor union activities.
In accordance with proper procedures, HHS did allow comments to be submitted by the public through September 28, 2021.
This rule, if adopted, would seemingly fly in the face of Federal Law and the SCOTUS ruling on the matter. It would allow labor unions to resume “skimming” upwards of $200 million per year from Medicaid providers who may not agree with the unions’ activities or wish to participate.
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