CMS Clarifies Medicaid DSH Rule

Last week the Centers for Medicare & Medicaid Services announced a final rule addressing the treatment of third-party payers in calculating Medicaid uncompensated care costs.  This calculation affects individual hospitals’ Medicaid disproportionate share (Medicaid DSH) limit.

According to CMS,

This rule clarifies federal requirements regarding the treatment of third party payers in determining the hospital-specific Medicaid DSH payment limit, which is set by statute as a hospital’s “uncompensated costs” incurred in providing hospital services to Medicaid and uninsured patients.

The final rule makes clearer our existing policy that uncompensated costs include only those costs for Medicaid eligible individuals that remain after accounting for all payments received by or on behalf of Medicaid eligible individuals, including Medicare and other third party payments. This is consistent with the statutory requirements governing Medicaid DSH and applicable limits.

All private safety-net hospitals receive Medicaid DSH payments.

See the full rule here.

MACPAC Looks at Medicaid DSH

Hospitals that serve especially large numbers of Medicaid and low-income patients still need Medicaid disproportionate share hospital payments (Medicaid DSH) to avoid red ink despite the expansion of Medicaid and the increase in the number of uninsured people fostered by the Affordable Care Act.

So concludes the Medicaid and CHIP Payment and Access Commission (MACPAC) the non-partisan legislative branch agency that advises Congress, the Secretary of the U.S. Department of Health and Human Services, and the states on Medicaid and Children’s Health Insurance Program issues.

In its March 2017 report to Congress, MACPAC writes that

In both expansion and non-expansion states, deemed DSH hospitals, which are statutorily required to receive DSH payments because they serve a high share of Medicaid-enrolled and low-income patients, continue to report negative operating margins before DSH payments. Read more

NAUH Weighs in on American Health Care Act

In a letter to members of Congress and selected congressional staff, NAUH shared its perspective on the American Health Care Act, the legislation Congress is considering as a means of repealing and replacing the Affordable Care Act.

The letter highlights several aspects of the proposed law NAUH appreciates and points to aspects with which it disagrees, including its failure to restore Medicare DSH payments to pre-Affordable Care Act levels, its continuation of Medicaid DSH cuts in Medicaid expansion states for two more years, and a methodology for indexing future growth in the program’s spending that NAUH believes will leave Medicaid underfunded in the future.

Find the complete letter here, on the NAUH web site.


MACPAC Points to March Medicaid DSH Report to Congress

Required to report annually to Congress on the state of the Medicaid program, members of the Medicaid and CHIP Payment and Access Commission reviewed drafts of their proposed March report to Congress at the agency’s January meeting in Washington, D.C.

In its draft report MACPAC addresses the Medicaid disproportionate share hospital payment program (Medicaid DSH), including DSH allotments, their relationship to the number of uninsured people, the amount and sources of hospital uncompensated care costs, and the impact of Medicaid DSH on hospitals that provide especially large amounts of uncompensated care while also providing essential community services.

The draft MACPAC report addresses:

  • the decline in the number of uninsured Americans;
  • the Medicaid DSH cuts scheduled to begin in federal FY 2018; and
  • the possibility of changing how Medicaid DSH payments are targeted to DSH-eligible hospitals.

All private safety-net hospitals receive Medicaid DSH payments and those payments are very important to them because they serve so many more uninsured patients than the typical community hospital.

See a draft of the chapter of the MACPAC report on Medicaid DSH here, on the MACPAC web site.

MACPAC Meets, Discusses Medicaid DSH Issues

Last week the Medicaid and CHIP Payment and Access Commission met in Washington, D.C. to review aspects of its required March report to Congress and to address other Medicaid and CHIP issues.

Included on the agenda of the meeting were:

  • a review of chapters of the March report on Medicaid disproportionate share (Medicaid DSH) and monitoring of access to care;
  • alternative approaches to state financing of their Medicaid programs;
  • Medicaid coverage for low-income adults; and
  • Medicaid program integrity issues.

MACPAC’s efforts, although not binding on the administration, carry a great deal of weight with those institutions.  In addition, they are very important to urban safety-net hospitals because those hospitals care for so many Medicaid patients.

See the presentations used to help guide these discussions here, on MACPAC’s web site.

Uninsured Patients, Provider Taxes Hurt Adequacy of Medicaid Payments

While Medicaid payments now typically cover more than the cost of Medicaid services in many states, they do not cover the costs of caring for low-income patients after providers care for uninsured patients and pay Medicaid provider taxes, a new study has found.

According to a Health Affairs report,

After accounting for supplemental payments, we found that in 2011, disproportionate-share hospitals, on average, received gross Medicaid payments that totaled 108 percent of their costs for treating Medicaid patients but only 89 percent of their costs for Medicaid and uninsured patients combined. However, these payments were reduced by approximately 4–11 percent after we accounted for provider taxes and local government contributions that are used to help finance Medicaid payments.

health affairsBecause they are all disproportionate share hospitals, this is especially a challenge for the nation’s private safety-net hospitals.

To learn more, go here to see the Health Affairs analysis “For Disproportionate-Share Hospitals, Taxes And Fees Curtail Medicaid Payments.”

Medicaid Supplemental Payments Set to Evolve

New health care delivery and reimbursement systems and new federal regulations will result in changes in how states deploy their Medicaid resources through supplemental payments in the coming years.

A new Commonwealth Fund report describes the kinds of supplemental Medicaid payments states currently make to hospitals – such as disproportionate share and upper payment limit payments – and notes the differing degree to which individual states use such supplemental payments.

financeIt also describes how those supplemental payments may be restructured in the coming years to foster greater use of value-based purchasing and to reward achieving state-created quality goals through new delivery and reimbursement systems such as accountable care organizations, bundled payments, shared savings program, capitated arrangements, and shared risk.

Such changes have potentially serious implications for private safety-net hospitals.

Learn more about what the future may have in store for Medicaid supplemental payments in the Commonwealth Fund report Integrating Medicaid Supplemental Payments into Value-Based Purchasing.

MACPAC Looks at Medicaid DSH

With Medicaid disproportionate share payments (Medicaid DSH) facing future reductions, the agency charged with advising Congress on Medicaid and Children’s Health Insurance payment and access matters is considering what changes the federal supplemental Medicaid payment program might need.

macpacAt a recent meeting in Washington, D.C., the Medicaid and CHIP Payment and Access Commission discussed the changing role and purpose of Medicaid DSH as more Americans obtain health insurance through private or public sources. MACPAC commissioners noted that hospital uncompensated care is falling, especially in states that have taken advantage of the Affordable Care Act to expand their Medicaid programs.

A new Medicaid DSH formula set to be used for FY 2018, based more heavily than the current formula on the number of uninsured people in individual states, is expected to result in larger-than-average reductions for hospitals in Medicaid expansion states.

Among the steps commissioners discussed were examining how hospitals use their Medicaid DSH funds; considering how any changes in the distribution of Medicaid DSH funds might affect other parts of states’ health care systems; and the role states should play in determining the allocation of Medicaid DSH funds.

Medicaid DSH funds are a vital source of support to help private safety-net hospitals care for their many uninsured patients.

For a closer look at the issue and MACPAC’s deliberations, see this CQ Roll Call article presented by the Commonwealth Fund.

NAUH Comments on Proposed Medicaid DSH Regulation

The National Association of Urban Hospitals has written to the Centers for Medicare & Medicaid Services to object to how the agency proposes changing its methodology for calculating eligible hospitals’ Medicaid disproportionate share (Medicaid DSH) payments.

NAUH LogoIn particular, NAUH opposes the manner in which CMS would treat payments from Medicare and third-party payers made on behalf of Medicaid-eligible individuals.

In NAUH’s view, the letter notes,

…the hospital-specific DSH limit has come to penalize the very hospitals – including private urban safety-net hospitals – that Medicaid DSH payments were designed to support.

The NAUH letter explains that

What troubles NAUH at this time is CMS’s apparent decision to rationalize and codify in regulations a narrower interpretation of the Medicaid DSH limit than what Congress described in section 1923(g) of the Social Security Act.

Read NAUH’s complete letter here.

CMS Proposes Medicaid DSH Rule

The Centers for Medicare & Medicaid Services has proposed a new rule that would clarify the basis for eligible hospitals’ Medicaid disproportionate share hospital payments (Medicaid DSH).

Individual hospitals’ Medicaid DSH payments are based on their uncompensated care costs and the rule clarifies that only uncompensated costs for Medicaid patients for whom hospitals receive no other payments, such as from Medicare, state or local governments, or third-party payers, would count toward their hospital-specific Medicaid DSH limit.

federal registerSee the rule here. Interested parties have until September 15, 2016 to submit formal comments to CMS about its proposal.

Representatives of private safety-net hospitals who would like to know more about how this proposal might affect their hospital can use the “contact us” link on this screen to seek further information.