A quick, timely update for our reader. As reported in our previous posts on the recently approved Tennessee waiver, in likely anticipation of the Biden Administration withdrawing the newly approved, but controversial waiver, on January 4, 2021 CMS Administrator Seema Verma sent a letter (available here) to State Medicaid Directors requesting they sign a Letter of Agreement “as soon as possible” establishing new procedural rights for any future waiver withdrawals by CMS. As we have pointed out in previous posts, approved waiver Terms and Conditions have historically included language, at a very high level, as to CMS’ ability to withdraw an already-approved waiver. For example, the Tennessee waiver approval included the following language:

Withdrawal of Waiver Authority. CMS reserves the right to withdraw waivers and/or expenditure authorities at any time it determines that continuing the waivers or expenditure authorities would no longer be in the public interest or promote the objectives of title XIX and XXI. CMS will promptly notify the state in writing of the determination and the reasons for the withdrawal, together with the effective date, and afford the state an opportunity to request a hearing to challenge CMS’ determination prior to the effective date. If a waiver or expenditure authority is withdrawn, FFP is limited to normal closeout costs associated with terminating the waiver or expenditure authority, including services, continued benefits as a result of beneficiary appeals, and administrative costs of disenrolling beneficiaries.

Under the new Letter of Agreement, which CMS intends to use to bind both the agency and the states, CMS would apply the following additional procedural protections to any future waiver withdrawal:

• CMS’ effective date for any withdrawal will be no sooner than 9 months after the date on which CMS notifies the state of its intention to invoke this option;
• States will have 15 days after notice to request a hearing as part of a preliminary appeal;
• States will have 90 days after notice to submit a written brief outlining the bases for its disagreement;
• Following submission of the state’s brief, CMS will have 90 days to response;
• The state will have 60 days following CMS’ reply to submit a rebuttal;
• CMS will hold a hearing within 45 days of the submission of the state’s rebuttal; and
• Following the hearing, CMS will issue its decision.

The Letter of Agreement notes that decisions of the Secretary are appealable to the Departmental Appeals Board and constitute final agency action, permitting the state the ability to seek remedies in the court of law. Of note, the Letter of Agreement states that monetary damages cannot remedy a breach through the appeals process outlined above, leaving open the option of monetary damages to be awarded by a Court.

What’s next? Certainly this throws a wrench into the Biden Administration’s likely preference to scrap the Tennessee waiver immediately upon taking office. Of course, this process would still permit a withdrawal, albeit over an extended timeframe. Moreover, it is possible that an incoming CMS could seek to retract or otherwise cancel these Letters of Agreement (we are still formulating our thoughts on the legal implications here).