Some advocates have highlighted steps that states can take to improve Medicaid beneficiary access without increasing provider rates.


Sept. 23—Opponents of large hospital payment cuts scheduled to begin next year under a provision of the Affordable Care Act (ACA) are lining up their plans to stop it once again.

Billions of dollars in cuts to the Medicaid Disproportionate Share Hospital (DSH) program, which is designed to offset costs of care for low-income uninsured and publicly insured patients, were required by the ACA to help pay for the coverage expansions in the healthcare reform law.

“We saw that Medicaid expansion does cut hospitals’ uncompensated care costs, so in the overall levels that becomes a reasonable way to try to fund some of the coverage expansion,” Benjamin Sommers, a professor at the Harvard School of Public Health and a Medicaid payment researcher, said about the DSH cuts at a Sept. 23 congressional briefing.

For instance, a recent analysis estimated that hospital uncompensated care costs in states that expanded Medicaid decreased from 4.1 to 3.1 percentage points of operating costs. Uncompensated care costs would have decreased from 5.7 to 4.0 percentage points of operating costs for hospitals in non-expansion states had those states expanded the program.

“The challenge is that every hospital does not see the average effect,” Sommers said.

Potentially major financial impacts on some safety net hospitals—especially in the 19 states that have not expanded Medicaid eligibility—have led to an ongoing effort to delay those cuts. To date, those efforts have pushed back the Medicaid DSH cuts by four years—they are now slated to begin in October 2017, which is the start of the next federal fiscal year.

Delay Plan

Opponents of the DSH cuts now plan to introduce another one-year delay in Congress next spring as part of a legislative package of Medicare provisions that are set to expire at the end of the current federal fiscal year. That same legislative package was included in the Medicare Access & CHIP Reauthorization Act of 2015 (MACRA) legislation that Congress passed last year.

If successful, the delay would prevent $2 billion in DSH cuts slated for FY18, Shawn Gremminger, director of legislative affairs for America's Essential Hospitals, said in an interview. The cuts then are scheduled to increase by $1 billion each year until reaching $8 billion.

Gretchen Hammer, Medicaid director for Colorado, agreed with Gremminger and Sommers that not all hospitals have seen the promised benefits of uncompensated care reductions—even in her state, which expanded Medicaid and pushed for other ACA coverage expansions.

“There is still the recognition—both for our federally qualified health centers and other safety net providers, as well as our hospitals—that until we better understand those patterns of coverage … there is an important piece to think through before we start making changes to the underlying payment mechanisms,” Hammer said at the briefing, which was sponsored by the Alliance for Health Reform and the Commonwealth Fund.

Medicaid provided $15.2 billion in hospital DSH payments in FY14, comprising a large share of the program’s $89.3 billion in overall hospital spending, according to a report from the Medicaid and CHIP Payment and Access Commission (MACPAC). Those supplemental payments helped bring total Medicaid payments to hospitals to 90 percent of the costs of delivering Medicaid patient care, according to estimates by the American Hospital Association.

Without another delay, states could mitigate the impact of the DSH cuts by better targeting their DSH expenditures as authorized by the ACA, Sommers said.

“For hospitals that still have high numbers of uninsured patients because they have low participation rates in Medicaid, or they have more immigrants who are not eligible, or other parameters, it’s about trying to figure out ways to make sure the states are spending the DSH money where it most needs to be spent,” Sommers said.

Gremminger said he agreed that states need to do a better job of targeting their federal and state DSH money but noted that the Centers for Medicare & Medicaid Services (CMS) has yet to issue related rules, for which states have been waiting. Those rules, which are expected next year, will spell out how CMS will exercise new ACA authority to redirect the dwindling DSH funds to states based on which states are best funneling the monies to the neediest providers.

Medicaid Rates

Although many provider advocates have long complained that Medicaid provider payments are insufficient because they don’t even cover the cost of the care provided, Sommers said the discussion of Medicaid spending is much more complicated than just about whether to increase provider rates.

“Our goal should not be that 100 percent of providers take Medicaid,” Sommers said. “We have to weigh the tradeoffs of any providers we want to focus on and ask, ‘Where are the barriers?’”

Medicaid beneficiaries are most likely to experience access problems when seeking care from medical specialists, according to MACPAC data.

“So if I were trying to think, ‘Where am I going to spend those scarce resources to improve participation?’ I would look at specialty care and some of the nonfinancial factors,” Sommers said.

Nonfinancial barriers to greater provider participation include antiquated, DOS-based payment systems and complicated provider recertification systems, Sommers noted.

“These are things that don’t necessarily cost much money but do take an up-front investment,” Sommers said.

However, Deborah Bachrach, managing director at Manatt Health Solutions and the former Medicaid director for New York, noted research has indicated slightly better access for Medicaid enrollees under Arkansas’ so-called private option, compared to those with traditional Medicaid coverage.

“The Medicaid beneficiaries enrolled in [private health plans] are getting better access to the same providers because they come with a slightly higher rate of reimbursement than they would if they were in Medicaid,” Bachrach said at the briefing. “So there’s lot of ways to think about how to use the money to ensure access.”


Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare

Publication Date: Friday, September 23, 2016