Dive Brief:

CMS denied Wyoming's unconventional request to protect residents from surprise bills from air ambulances by expanding Medicaid to all of the state's citizens, but narrowly tailored for only the purposes of air ambulance services.

Wyoming also was seeking to regulate air ambulances as a public utility and pay operators a flat fee periodically as opposed to a payment per ride .

. In its denial letter, CMS said the proposal is in conflict with existing federal law, not budget-neutral and a departure from the core mission of the Medicaid program.

Dive Insight:

CMS Administrator Seema Verma has touted the importance of giving states flexibility to design Medicaid programs that work for their budgets and the needs of their citizens. On Wednesday, Verma talked about state flexibility in front of a crowd in San Francisco at the annual J.P. Morgan Healthcare Conference, noting the Medicaid program cannot be a one-size-fits-all approach.

Still, her department said it will not approve Wyoming's request for flexibility and will not allow its proposal to regulate air ambulances in way the state argues would protect citizens from surprise bills.

In its application, Wyoming argued it had an oversupply of air ambulances in some areas but large gaps in others. The state's proposal was to have air ambulance providers go through a competitive bidding process to provide rides and the state would direct call volume.

On top of that, air ambulance operators would be paid a periodic payment and not a fee-for-service schedule. Eligibility for coverage would be determined retroactively or after a citizen was flown for care.

The state likened the process to how many others regulate public utilities. The state argued it doesn't make sense to have competing water utilities "digging and connecting water lines to your house," or "ten toll road operators building roads from the same origin to the same destination."

Despite CMS' denial letter Jan. 3 saying Wyoming's plan doesn't "align with the core objectives of Medicaid," Verma's administration has approved numerous requests from states to implement controversial work requirements tying Medicaid coverage to work or volunteer hours. Courts have blocked the requirements in a handful of states for leading to sharp coverage losses, which critics say is the implicit purpose of the program.