- Using data from the CMS Office of the Actuary, the uninsured rate in the 2021 IPPS proposed rule is 9.5%.
- That estimate is likely low given the economic impact of COVID-19 and the resulting spike in unemployment.
- If CMS updates its estimate of the 2021 uninsured rate in the final rule it could increase UC DSH payments to eligible providers significantly.
A bit of background is required before I get into the main topic of this post, which is how the dollars available for allocation to eligible safety net hospitals is the product of two national factors.
After passage of the ACA, 25% of DSH payments are considered traditional. These are paid by multiplying the Medicare DRG payment times an adjustment factor that includes the difference between the disproportionate patient percentage and the DSH qualifying threshold.
The other 75%, Uncompensated Care (UC) DSH, is based on two national factors — the topic of this post — and a third hospital-specific factor of how much indigent care a hospital provides relative to all other hospitals. The rationale for this is that post-ACA coverage would expand, and the uninsured population and the need for Medicare to provide safety net hospitals with additional indigent care payments would decrease.
Two national factors
Factor one. Factor one is what CMS projects 75% of Medicare Disproportionate Share (DSH) payments to hospitals will be in 2021.
Factor two. Factor two is one minus the change in the rate of uninsured from pre-ACA to the current year. You multiply those two numbers together, and you get the pool of dollars that are allocated to DSH-eligible hospitals based on the relative amount of uncompensated care they have provided during the fiscal year. So if in a given year, the rate of uninsured is 40% lower than what it was pre-ACA, then the UC DSH pool is reduced by 40%.
In the 2021 IPPS proposed rule, factor one is $11.519 billion. So little changes in factor two are important. The proposed rule estimates, using data from the CMS Office of the Actuary, the uninsured rate for federal fiscal 2021 is 9.5%. If that estimate of the uninsured rate seems low to you, it’s because the estimate was generated prior to COVD-19 economic downturn, which has resulted in at least 26.8 million individuals losing their job-related health insurance. By January 2021 — squarely in the middle of next FFY — of those 26.8 million, 23 million are eligible for Medicaid or exchange coverage. The remaining 3.8 million individuals are ineligible for Medicaid or the exchanges for a variety of reasons.