Be Careful What You Ask for: The Repeal of the Boren Amendment and Continuing Federal Responsibility to Assure that State Medicaid Programs Pay for Cost Effective Quality Nursing Facility Care

Abstract

In the early 1980s, largely at the urging of the states, Congress enacted the Boren Amendment to the Medicaid Act. The Boren Amendment provided standards governing the development and adequacy of Medicaid payments to hospitals and nursing homes. Most importantly, from the states' point of view, the Boren Amendment transferred authority for validating the states' compliance with federal requirements from the federal government to the states. The states expected that they had acquired unfettered discretion to determine Medicaid payments to hospitals and nursing homes. However, the courts ruled that the states' discretion was not unlimited and required states to have empirical evidence that Medicaid paid the cost of delivering care in compliance with quality standards. As a result, after intense lobbying, the states secured the Boren Amendment's repeal in 1977.

Many proclaimed that repeal of the Boren Amendment precluded provider challenges to the adequacy of Medicaid payments. The Medicaid Act, however, continues to contain standards that non-institutional providers have used to challenge Medicaid rates for many years. Repeal of the Boren Amendment remands institutional providers to the payment standards and legal remedies utilized by non-institutional providers.

According to the Act, State Medicaid Plans must assure payments consistent with efficiency, economy, quality of care and equality of access to health care. The history of the statute makes clear that the standards are judicially enforceable. Courts routinely enforce the provisions, requiring that the payment methodology be supported by a procedurally sound, principled analysis. The Department of Health and Human Services also has refused approval of State Plans when a state fails to demonstrate a nexus between Medicaid payments and the statutory factors. Thus, contrary to the hopes of the states, repeal of the Boren Amendment has not insulated state Medicaid payments from judicial review and, moreover, may once again subject the reimbursement provisions of State Medicaid Plans to federal administrative oversight.