The House Energy and Commerce Committee next week will consider a full repeal of the Medicaid disproportionate share hospital cuts, a sign that hospitals are getting closer to securing the top lobbying priority for safety net providers and academic medical centers.
The committee will hold a hearing next Tuesday on proposed legislation from Rep. Eliot Engel (D-N.Y.), whose home state gets the single largest so-called Medicaid DSH allotment in the country. In fiscal 2018, New York received $1.8 billion of the roughly $12 billion in annual federal payments.
Engel has pitched a full repeal of the cuts mandated by the Affordable Care Act, which are set to take effect Oct. 1. Should those cuts move forward, they would reduce federal DSH payments to states by $4 billion in fiscal 2020 and $8 billion in fiscal 2021. An aide to Engel said that a full repeal “provides the long-term solution.”
Last week, 300 of the 435 U.S. House of Representatives lawmakers sent a letter to the chamber’s leadership urging a two-year delay to the DSH cuts, and hinted that some in Congress believe the Medicaid DSH formulas need to be reconfigured, calling for a “sustainable, permanent” solution.
“This delay will ensure that hospitals can continue to care for the most vulnerable in our communities,” the lawmakers wrote, led by Engel and Rep. Pete Olson (R-Texas).
The amount the federal government pays out for DSH varies enormously across states and is mostly arbitrary, reflecting the caps set by Congress in 1992 instead of a relevant benchmark.
Florida, where about 3.3 million people are uninsured, gets the exact same federal DSH allotment as Connecticut, where about 245,000 people are uninsured.
Finance Committee Chair Chuck Grassley (R-Iowa) has said he wants to see a reset. Sen. Marco Rubio (R-Fla.), whose state has a strong vested interest in a formula change, has used the Sept. 30 deadline to push a proposal that would base the federal dollar allotment on a particular state’s share of U.S. citizens living below the poverty level.
But the major trade groups representing DSH hospitals continue to push for a simple delay, since their constituents include hospitals in all the states. Dr. Bruce Siegel, CEO of America’s Essential Hospitals, said at a briefing to House staff earlier this month that he’d be open to a formula change as long as hospitals don’t see cuts to existing funding. That means Congress would have to allocate even more money to the program.
House Speaker Nancy Pelosi (D-Calif.) said she backed another delay when she addressed American Hospital Association’s annual meeting in April. She noted that she wouldn’t back a program overhaul.
“We cannot support efforts that will reward states for not expanding Medicaid or simply take DSH money from some other state and give it to others,” she said. “Who thought that was a good idea?”
The DSH debate doesn’t fall along the lines of which states expanded Medicaid or not. Alabama and Missouri haven’t expanded Medicaid but receive high federal DSH allotments, and would likely lose money if Congress decided to redistribute the existing payments.
Although the policy rationale behind the ACA-mandated cuts was that Medicaid expansion would shrink hospitals’ need for DSH money, high-DSH expansion states such as New York and New Jersey aren’t giving an inch.
Siegel framed the debate over expansion states’ need as being “a little more complicated now” than in the early years of the ACA.
“I think the market has changed in the last eight years or nine years when we started down the road of Medicaid expansion,” he said at the Capitol Hill staff briefing.
He pointed to the slight rise in the uninsured rate recently, as well as the increase of high-deductible plans that put more fiscal burden on enrollees.
“We are frankly concerned about any moves to move us toward skinny health plans,” he added.
Enrollment in more bare-bones commercial plans doesn’t really affect the Medicaid enrollment, but he argued that expansion still brings Medicaid shortfall — which is the difference between Medicaid and Medicare reimbursement.
“If you have 70% Medicaid patients which some of our hospitals do, you are in a terrible disadvantage in terms of payment streams, with the shortfall becoming enormous for you,” he said.
There is another Medicaid program that can help hospitals with shortfall: the “upper payment limit” supplement for Medicaid fee-for-service. States can deploy UPL payments to hospitals in order to increase their reimbursement based on rates Medicare would have paid for the same treatment.
UPL is the largest Medicaid supplemental funding program, with about $13 billion in annual spending according to the Medicaid and CHIP Payment and Access Commission data from fiscal 2017.
The UPL program is also under scrutiny by MACPAC, whose analysts found that 17 states have overspent billions of these payments.