HHS Reverses ARRA Policy on Medicare Clawback

The American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5) provides states with an increase in their federal medical assistance percentages (FMAPs) from October 1, 2008 through December 31, 2010. The Department of Health and Human Services (HHS) initially determined that the increased FMAPs would not apply to the Medicare Part D clawback provisions. As such, clawback payments have been determined using a state’s regular FMAP.

On February 18, 2010, HHS announced a change in this interpretation and notified states it would apply the ARRA FMAPs to clawback payments. This change is estimated to save states $4.3 billion over the 27-month period. The savings to states will be retroactive to October 1, 2008, with prior savings applied as a credit to states' future clawback payments.