Tag Archives: Medicaid DSH Payments

Hospital Revenue Unstable Despite Outpatient Volume Growth

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https://revcycleintelligence.com/news/hospital-revenue-unstable-despite-outpatient-volume-growth?eid=CXTEL000000093912

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Payer mix shifts, increases in self-pay, and lower Medicaid revenue per case are troubling hospital revenue despite a 2.4 percent boost in outpatient volume.

Hospitals recently saw increases in national inpatient and outpatient volumes. However, net hospital revenue continues to be unstable for non-profit organizations, according to a new analysis from the public accounting, consulting, and technology firm Crowe.

“As many health systems expand their portfolio of services (more outpatient facilities, entrees into insurance products, and other ancillary investments), stability of hospital-based net revenue becomes more important to financial decisions,” the analysis stated. “Unfortunately, instability appears to be the current trend, forcing many CFOs of not-for-profit healthcare systems to study operations and budget them on a monthly or quarterly financial performance basis, in the same manner that their peers in for-profit organizations do.”

The consulting firm analyzed data from its revenue cycle analytics solution for 622 hospitals in Medicaid expansion states and 389 hospitals in non-expansion states. The analysis of data from January through September of 2017 and 2018 revealed some positive results for 2018.

Inpatient volume is up 0.6 percent in 2018, and gross revenue per case also increased 5.3 percent during the period.

At the same time, outpatient volume rose 2.4 percent and gross revenue per case increased 7.1 percent on the outpatient side.

Hospitals may be reaping the benefits of higher volumes. However, net revenue per case demonstrated greater volatility on the inpatient and outpatient sides, the firm pointed out. Net revenue per inpatient case only increased 1.6 percent between 2017 and 2018 and net revenue per outpatient case rose 5.5 percent during the same period.

“It is important to consider that these trends do not hold true across all payers. As a result, some hospitals may be more exposed to diminishing growth in net revenue per case,” the analysis stated. “Although an increase in net revenue appears to be good news for hospitals, the manner in which revenue is increasing follows some troublesome trends.”

The “troublesome trends” identified by Crower researchers included a significant shift in payer mix. Medicare managed care, self-pay, and other payers (i.e., third-party liability and worker’s compensation) increased by 1.6 percent for inpatient and 1.1 percent for outpatient overall, the firm reported.

“In addition to these payer classes having a lower net realization overall, they also challenge finance leadership’s ability to forecast net revenue, as seasonality and patient engagement vary by facility,” the analysis explained.

Increases in self-pay accounts particularly contributed to hospital revenue instability, Crowe added. Self-pay increased 16.1 percent by 2018, representing six percent of the average hospital’s payer mix. Self-pay accounts continue to be the most difficult to collect, suggesting a growing obstacle for hospital revenue.

Medicaid net revenue also fell from 2017 to 2018, the analysis showed. Net revenue per case for both traditional and managed care Medicaid decreased 6.9 percent for inpatient and 1.1 percent for outpatient.

Hospitals that treated a greater number of Medicaid beneficiaries will continue to see their Medicaid revenue drop under new regulatory changes, researchers predicted.

For example, CMS finalized a new policy that will change the methodology for determining Medicaid Disproportionate Share Hospital (DSH) payments. Medicaid offers DSH payments to hospitals that treat a greater proportion of low-income and vulnerable patients and bases the payment amount on the hospital’s uncompensated care costs.

The new policy will clarify that uncompensated care costs include only the costs for Medicaid-eligible patients with payments remaining after accounting for the reimbursement to the hospital by or on behalf of Medicaid-eligible individuals, including Medicare and third-party payments.

A federal judge vacated the new policy’s implementation on a national level in March 2018, arguing that changing the policy exceeded CMS’ authority because the Medicaid Act specifically identifies what constitutes uncompensated care costs. Several states have also challenged the policy in court.

CMS is currently challenging the rulings.

New rules for the 340B Drug Pricing Program could also further decrease Medicaid revenue for hospitals, the analysis stated. CMS recently finalized $1.6 billion in hospital payment reductions for 340B covered drugs.

The American Hospital Association (AHA) and several other groups sued CMS over the payment cuts. But a federal judge ruled that CMS can enforce the billions of dollars in payment reductions.

Additionally, the Crowe analysis uncovered a decrease in final denial write-offs, or patient bills that were not paid by payers. Final denial write-offs for outpatient services fell by almost 15 percent from 2017 to 2018, the data showed.

While a drop in final denial write-offs indicates business office improvements, researchers noted that recent changes in managed care contracting may challenge denial rates going forward. Contracts for outpatient diagnostic imaging are likely to see the greatest challenge to denial rates, they reported.

Keep Harmful Cuts in Federal Medicaid Disproportionate Share Hospital Payments at Bay

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http://www.commonwealthfund.org/publications/blog/2017/dec/harmful-cuts-in-federal-medicaid-dsh?omnicid=EALERT1329977&mid=henrykotula@yahoo.com

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  • While the ACA has had a major impact on reducing hospitals’ uncompensated care burdens, compensated care remains a challenge for many hospitals in poor communities
  • The White House and Congress have a final shot at once again ensuring that the poorest communities are not left without vital health care resources

Congress may delay a funding reduction for state Medicaid disproportionate share hospital (DSH) payments — direct, supplemental payments to hospitals serving high numbers of low-income patients — as part of end-of-year legislation. Although protecting the poorest communities from the loss of DSH funds has emerged on a short list of must-dos, final passage is far from certain. It may hinge on finding a funding strategy other than the one originally chosen by the House of Representatives — a more than $6 billion cut in critical public health funding from the Prevention and Public Health Trust Fund.

For nearly four decades, DSH payments have been a crucial part of Medicaid policy. But in light of the major gains in coverage anticipated for the poor under the Affordable Care Act’s adult Medicaid expansion, Congress scheduled a substantial reduction in federal Medicaid DSH payments beginning in 2014. Lawmakers assumed, not unreasonably, that the coverage expansions would translate into additional hospital revenue, thereby alleviating the need for as much direct DSH payment supplementation.

The relatively rosy scenario for DSH hospitals — especially those serving the poorest communities — changed dramatically in 2012 when the United States Supreme Court made Medicaid expansion optional; as of the end of 2017, nearly 3 million poor adults in 19 states continue to go without the Medicaid coverage they should be receiving.

To be sure, the ACA has had a major impact on reducing hospitals’ uncompensated care burdens. The Medicaid and CHIP Payment and Access Commission (MACPAC), which advises Congress on federal Medicaid policy, reports that between 2013 and 2014, hospital uncompensated care spending dropped by $4.6 billion, a 9 percent decrease, with the greatest declines occurring in Medicaid expansion states. But uncompensated care remains a crucial issue for many hospitals, especially those located in the poorest communities, and, in particular, hospitals serving poor communities in Medicaid nonexpansion states.

Additionally, even in Medicaid expansion states, a considerable number of low- and moderate-income adults who qualify for subsidized marketplace coverage remain uninsured. Even among those with subsidized marketplace plans whose incomes also are low enough to qualify for cost-sharing assistance (250 percent of poverty, or an annual income of about $30,000, and below), unpaid medical bills continue to add to hospitals’ uncompensated care burdens.

Should final congressional action before the holiday include a DSH cut delay, it would be the latest in a line of postponed Medicaid DSH cuts enacted by Congress over several years. Without another postponement, hospitals will lose $2 billion of the almost $12 billion federal allotment for fiscal year 2018. If this last-minute effort to stop the cuts once again as part of the spending bill does not succeed, then over 10 years, the cuts would reduce DSH payments by some $43 billion according to MACPAC.

For many reasons — the number of states that have failed to expand Medicaid; the number of Americans who continue to report that insurance coverage is unaffordable; high deductibles and other patient cost-sharing even among those with private health insurance — continuing to push back the day of reckoning on federal DSH funding reductions is a matter of high importance, not only for individual hospitals but for the communities whose health care systems these hospitals help anchor. The situation facing hospitals in nonexpansion states is especially grim; according to one estimate, failure of 19 states to implement the ACA Medicaid expansion can be expected to translate into an additional loss of $81.5 billion by 2026.

The White House and Congress have a final shot at once again ensuring that the poorest communities are not left without vital health care resources — and doing so in a way that does not pit health care against public health.

 

CMS moves forward with $43B in DSH payment cuts

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http://www.beckershospitalreview.com/finance/cms-moves-forward-with-43b-in-dsh-payment-cuts.html

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CMS issued a proposed rule Thursday that lays out a methodology for implementing cuts to Medicaid Disproportionate Share Hospital allotments under the ACA beginning in fiscal year 2018.

With the expectation of lower uninsured rates and lower levels of hospital uncompensated care, the ACA adjusted the amounts of funding available to states under the Medicaid program for hospitals that serve a disproportionate share of low-income patients. The ACA calls for aggregate reductions to Medicaid DSH payments annually from FY 2014 through FY 2020. Subsequent legislation delayed the start of the reductions until FY 2018 and pushed the end date back to FY 2025.

Medicaid DSH allotments are slated to be reduced by $2 billion in FY 2018. The reductions will grow by $1 billion per year through FY 2024, when payments will be cut by $8 billion. DSH allotments will be reduced by another $8 billion in FY 2025.

CMS proposed a methodology that would account for new data sources, some of which were unavailable during prior rulemaking. Those sources include DSH Medicaid Inpatient Utilization Rate data, U.S. Census Bureau data and existing state DSH allotments. “We are proposing to utilize the most recent year available for all data sources and are proposing to align data sources whenever possible,” said CMS.

The proposed methodology would help ensure DSH payments reach hospitals with the most need for financial assistance due to high volumes of Medicaid inpatients and high levels of uncompensated care, according to CMS.

CMS will accept comments on the proposed rule until Aug. 28 at 5:00 p.m.

Medicaid Changes in Better Care Reconciliation Act (BCRA) Go Beyond ACA Repeal and Replace

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Medicaid Changes in Better Care Reconciliation Act (BCRA) Go Beyond ACA Repeal and Replace

Medicaid Changes in Better Care Reconciliation Act (BCRA) Go Beyond ACA Repeal and Replace

The Senate released an updated discussion draft of legislation called the Better Care Reconciliation Act of 2017 (BCRA) on July 20, 2017. For Medicaid, the overall framework is very similar to earlier versions of the bill in the Senate as well as the American Health Care Act (AHCA) that passed in the House. Both the BCRA and the AHCA go beyond repeal and replacement of the Affordable Care Act (ACA) to make fundamental changes to Medicaid by setting a limit on federal funding through a per capita cap or block grant. The BCRA also includes additional changes that would further reduce federal spending for states with high per enrollee spending, limit state financing mechanisms, allow states to impose work requirements, and make other eligibility changes. The revised draft of the BCRA leaves many provisions up to HHS Secretary discretion, creating further uncertainty for states about how implementation of the legislation would proceed. Across the board, these changes would have significant implications for the 74 million people covered by the Medicaid program and for states that jointly finance and administer the program.

The Congressional Budget Office estimates that under current draft of the BCRA, federal Medicaid spending related to the coverage provisions would decline by $756 billion over the 2017-2026 period or $739 billion accounting for all Medicaid provisions in the bill. According to CBO’s longer-term projections, the BCRA would reduce federal Medicaid spending by 35% in 2036 (Figure 1). These reductions would leave states with difficult choices about how to fill in the gaps in federal funding or cut back on Medicaid eligibility, benefits, or reimbursement rates (Figure 2). This brief explains the five most significant Medicaid changes in the BCRA as well as additional Medicaid changes that could have major implications for states, providers, and beneficiaries.

5 Most Significant Medicaid Financing Changes in the BCRA

1. Phase out the enhanced federal financing for the ACA Medicaid expansion.

Under the BCRA, for states that adopted the expansion as of March 1, 2017, the enhanced federal match would phase-out from 90% in CY 2020, to 85% in 2021, 80% in 2022, 75% in 2023 and then to the regular state match rate in 2024 and beyond. Thirty-one states plus DC have implemented the Medicaid expansion (Figure 3). On average, expansion enrollees account for 20% of all Medicaid enrollees (as of early 2016) and federal expansion financing accounts for about 21% of all Medicaid funding (for FY 2015). However, these shares are much higher in some states, placing them at higher risk for facing challenges in responding to the reduction in the federal match. Multiple states are likely to eliminate or scale back their expansion coverage due to the increased cost if federal funding is reduced, including eight expansion states (AR, AZ, IL, IN, MI, NH, NM, and WA) that have legislation requiring them to reduce or eliminate the expansion if the federal match rate is reduced. Given the magnitude of estimates of how much it would cost states to replace federal expansion funds, it appears that it is unrealistic to suggest that expansion states would be able to replace those funds and continue their expansion programs at current levels without the enhanced expansion match rate. Reports suggest that waivers or additional grant funding may be offered to states in place of the enhanced funding for the expansion, however, it is unlikely that such amounts would fully offset federal funding reductions in the BCRA tied to the expansion.

2. Limit federal Medicaid funding through a per capita, or per enrollee, cap on financing.

Under current law, Medicaid provides a guarantee of coverage for individuals who are eligible for the program and a guarantee to states of federal matching dollars for spending on Medicaid services. Beginning in FY 2020, the BCRA would limit federal Medicaid funding to each state based on the sum of the costs per enrollee for five beneficiary groups – elderly, blind and disabled adults,1 children, expansion adults, and other adults – multiplied by the number of enrollees in the group and the state’s federal match rate. The proposed legislation specifies a uniform national inflation factor for the federal financing growth rate. Under both AHCA and BCRA, the per enrollee amounts would increase annually at slower rates than projected growth for Medicaid.

The caps are estimated to result in large reductions in federal Medicaid spending over time. Under BCRA, the caps would initially grow by the Consumer Price Index for medical care (CPI-M) for adults and children and by the CPI-M plus one percentage point for elderly and disabled groups. Starting in 2025, per enrollee amounts for all groups would increase by the historically lower CPI for urban consumers (CPI-U). All of these rates are lower than projected growth for private health insurance spending per enrollee. Reductions in federal Medicaid funding from the caps are expected to grow over time, especially after 2025 when the inflation factor is limited to CPI-U. Current projections have CPI-M growing at 3.7% and CPI-U at 2.4% annually; however, the rate of growth for these indices can vary and fluctuate over time which could cause uncertainty and instability in state budgeting.

3. Provides Secretary discretion to adjust per enrollee spending down for states with per enrollee spending 25% higher than the national average.

The BCRA also includes a provision not included in the AHCA, which would direct the HHS Secretary to adjust target per enrollee amounts under the per capita cap to bring states closer to national average spending. Specifically, the Secretary would adjust a state’s target per enrollee amounts by 0.5% to 2% for states spending 25% or more either above or below the national average per enrollee expenditures beginning in 2020. These adjustments are applied to overall per enrollee spending in 2020 and 2021 and then for each enrollment group in subsequent years. Adjustments are to be budget neutral to the federal government (meaning they would not result in a net increase of federal payments under the per capita caps for the fiscal year). Certain states with population densities less than 15 individuals per square mile (currently: AK, MT, ND, SD, and WY) would be exempt from this provision. Data for 2014 show that the number of states with high per capita spending that face tighter caps exceeds the number of states that would experience relief for having low spending overall and for each eligibility group (Table 1). Secretary discretion and actual spending patterns will make it difficult for states to estimate the effect of this provision.

4. Allow states the option to choose block grant financing for non-expansion Medicaid adults.

Beginning in FY 2020 under the BCRA, states could elect to receive federal financing for nonelderly/non-disabled traditional adults (low-income parents and pregnant women) and/or adults eligible through the ACA Medicaid expansion in the form of block grant instead of per capita cap funding. The block grant amount that states would receive from the federal government is initially based on the state’s target per capita spending amount for the fiscal year multiplied by the number of adult enrollees and the federal average Medicaid matching rate. The amount would grow annually by CPI-U even prior to 2025 when the per capita cap amounts would grow by the higher CPI-M inflation factor. States have a maintenance of effort (MOE) requirement—essentially, a minimum amount states must spend each year—that is the state share of the enhanced CHIP match rate (without the 23 percentage point increase provided under the ACA) multiplied by the block grant amount. If a state fails to meet the MOE requirement in a given year, its federal block grant amount for the following year would be reduced. States that meet MOE and continue to elect the block grant option can rollover unused block grant funds into the next fiscal year.

Under the block grant option, states could impose conditions of eligibility and not comply with key provisions in current law like comparability and state-wideness.  Under the block grant option, states would be required to cover low-income parents and pregnant women at current federal minimum income levels and provide certain benefits. However, states could set conditions of eligibility for groups beyond these federal minimum groups, including for ACA expansion adults. Additionally, states electing the BCRA block grant option would not have to comply with other federal requirements, including comparability (the requirement that Medicaid-covered benefits be provided in the same amount, duration, and scope to all enrollees), state-wideness (the requirement that bars Medicaid programs from excluding enrollees or providers because of where they live or work in the state), and freedom of choice of provider (that allows beneficiaries to be permitted to choose among any provider participating in Medicaid). Like per capita caps, Medicaid block grants fail to account for changes in health care costs over time. Block grants also carry additional risk for states, providers, and beneficiaries because they do not account for changes in Medicaid enrollment (which could increase during an economic downturn).

5. Provides the HHS Secretary discretion to allocate funds to address the opioid crisis and public health emergencies. 
The BCRA appropriates $45 billion for FY 2018 through FY 2026 for grants to states to support substance use disorder treatment and recovery support services with significant discretion to the HHS Secretary to allocate the funds. The BCRA also provides the HHS Secretary with discretion to exclude from a state’s per capita cap or block grant limit a total of $5 billion across all states for Medicaid spending in response to a public health emergency from January 2020 through December 2024. This exclusion would only apply during a period in which the HHS Secretary has declared a public health emergency in a state or region and also deemed an exclusion appropriate. Under current law, states can increase spending with a guaranteed federal match or seek waivers (like in Flint, MI or for states hit by hurricane Katrina) to address public health emergencies.

Other Significant BCRA Medicaid Changes

Other BCRA Medicaid changes with significant implications for states, providers, and beneficiaries include the following:

Limiting states’ ability to use provider taxes to finance their share of Medicaid by lowering the provider tax safe harbor threshold2 from 6.0% to 5.0% of net patient revenues over 5 years, beginning in 2021. All states except for Alaska currently use provider taxes to finance the state share of Medicaid, and in 2016, 28 states had at least one tax exceeding 5.5% of net patient revenues. The proposed BCRA change could shift additional costs to states or result in additional reductions in Medicaid payment rates, services, or eligibility.

Creating a state option to require work as a condition of eligibility for nondisabled, nonelderly Medicaid adults as of October 1, 2017 (with some exemptions for certain groups including pregnant women or the sole caretaker of a child under age 6 or a child with a disability). Depending on how they are implemented, work requirements could increase administrative burdens on states and adversely affect some people, who are unable to comply due to their health, family caregiving obligations, or other reasons, by preventing them from accessing needed health coverage through Medicaid.3

Cancelling scheduled disproportionate share hospital (DSH) payment reductions for non-expansion (but not for expansion) states. The BCRA would exempt non-expansion states from the DSH reductions that were included in the ACA. During FY 2020-FY 2023, the BCRA would also provide a DSH payment increase to non-expansion states with per capita FY 2016 DSH allotment amounts (the FY 2016 DSH allotment divided by the number of uninsured individuals in the state for the fiscal year) that are below the national average per capita amount. A state qualifies as a non-expansion state if it is not covering expansion adults on or after January 1, 2021. This means that current expansion states that discontinue their expansions by the end of 2020 could qualify for increased DSH funds after their expansion ends. In addition, the BCRA would provide certain non-expansion states with $10 billion over 5 years (FY 2018-FY 2022) for safety-net funding.

Changing eligibility and enrollment processes with new requirements for eligible individuals to obtain and maintain Medicaid coverage. Changes include: repealing the requirement for states to cover Medicaid benefits retroactively for three months prior to the month of an individual’s enrollment in the program except for enrollees who are eligible based on old age or disability only); prohibiting hospitals from temporarily enrolling individuals in Medicaid if they are likely to be eligible under a state’s Medicaid eligibility rules (a policy known as “hospital presumptive eligibility”); removing a presumptive eligibility option that includes health care providers other than hospitals for expansion adults; and giving states the option to renew eligibility of Medicaid expansion adults every six months (or more frequently) compared to the current 12 month redetermination period.

Prohibiting federal Medicaid funding for Planned Parenthood for one year (beginning on the date of enactment). The Hyde Amendment already prevents the use of federal funds for abortion services,4 so the effect of this proposed policy would be to limit Planned Parenthood’s capacity to provide preventive care and other services to women (such as clinical breast exams or birth control).

Repealing the enhanced federal match rate available under the ACA for the Community First Choice (CFC) state plan option, as of January 1, 2020. The ACA established the CFC option to allow states to provide home and community-based attendant services and supports to Medicaid enrollees who would otherwise require an institutional level of care. States taking up the option currently receive a 6% increase in their federal match rate for CFC services, and without this additional funding states may eliminate the option. The BCRA also creates a demonstration that would provide 100% federal matching funds for certain states selected by the HHS Secretary providing home and community-based services (HCBS) for seniors or adults with disabilities under a Section 1915 (c) or (d) waiver or Section 1915 (i) state plan authority, limited to $8 billion over four years, from 2020 through 2023. The Secretary would select participating states with priority given to the 15 states with the lowest population density. Unlike CFC, the authority for this new demonstration is time-limited, all states likely could not participate, and federal funding is capped. The $8 billion allocated to the new demonstration is less than half of the cost of the elimination of CFC funding, estimated by the CBO at $19 billion over 10 years.

Increasing the federal match rate for Medicaid services provided to American Indians by non-Indian Health Services (IHS) providers. Under existing law, the federal government covers 100% of the costs of Medicaid-covered services provided to American Indians through an IHS or Tribally-operated facility, and the BCRA would expand this 100% match rate to apply to all Medicaid-covered services delivered by all Medicaid providers to Medicaid-eligible members of an Indian tribe.

Repealing the essential health benefit requirement in Medicaid alternative benefit plans, beginning in 2020. The alternative benefit plans are required for expansion adults and a state option for benefit package design for certain other populations. While the Medicaid benefit package for children under Early and Periodic Screening, Diagnostic and Treatment (EPSDT) is comprehensive, states have flexibility to design benefit packages for adults, and many services for adults are offered at state option. If the essential health benefits requirement were repealed, there would be no federal minimum requirement in Medicaid to ensure that adults have coverage in certain areas such as mental health and substance use disorder treatment.

Medicaid And The Latest Version Of The BCRA: Massive Federal Funding Losses Remain

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http://healthaffairs.org/blog/2017/07/14/medicaid-and-the-latest-version-of-the-bcra-massive-federal-funding-losses-remain/

Washington, DC at the Capitol Building

Where Medicaid is concerned, the most notable thing about the latest version of the Better Care Reconciliation Act (BCRA) is that despite the drama of the past two weeks—the flood of news coverage regarding the potential impact of the losses; mounting concerns raised by Senators from expansion and non-expansion states alike; and the massive outcry from hospitals, physicians, insurers, and health care organizations—the new iteration leaves untouched the fundamental Medicaid contours of the earlier version.

The new draft retains the federal funding bar for Planned Parenthood (§ 123) as well as the earlier version’s limit on states’ ability to fund their programs through lawful, broad-based provider taxes (§ 131). The new bill does virtually nothing to lessen the financial losses to states that will flow from the prior iteration. According to the Congressional Budget Office (CBO), these losses would surpass $770 billion over 10 years as a result of provisions that eliminate the enhanced funding for the adult expansion population and superimpose flat annual growth restrictions on Medicaid’s historic federal funding formula (§124 and §132).

By 2036, CBO reports, federal Medicaid funding would be about 35 percent below current law, a catastrophe of epic proportions. According to one study that sought to translate BCRA’s Medicaid provisions into state-by-state loss estimates, California alone would lose between $37 and $52 billionbetween 2020 and 2027, depending on how the cap’s arbitrary growth limits play out over time. Indeed, depending on how the cap, which is tied to a general economic inflation rate that cannot be known with certainty, plays out against actual state spending needs—triggered by everything from new vaccines to long-term services and supports to address the opioid crisis or the consequences of Zika—the federal funding losses could grow from catastrophic to unimaginable.

Small Crumbs Of Money

Perhaps Congressional leaders have sought to convince their colleagues to disregard the CBO estimates and these studies, arguing that Congress, in fact, will never allow the bottom to fall out on states and will come through with additional funding. But the newest version of the bill underscores the fundamentally meaningless nature of such assurances.

Small crumbs of Medicaid give-backs can be found at various places in the new version. One that might be thought of as the Louisiana Purchase is designed to help one state cope with massive loss; over the long term, however, the adjustment washes out in the far larger picture of declining federal funding for an exceptionally poor state.

For purposes of setting the arbitrary growth limits over time, the original bill relied on per capita spending data from the 2014-2015 time period. The new draft would allow a late-expanding state (i.e., Louisiana) to use 2016 as its base period (§ 132). But regardless of whether it is tied to 2014-2015 or 2016, nothing can mask the fact that the base period is part of a growth formula unrelated to the real world of Medicaid spending. All state programs will be tied to the distant past where federal Medicaid funding is concerned.

Furthermore, the new version does not exempt the state from the bill’s exceptionally clumsy rate-setting procedures, which lack adjustments for volume and intensity or new technology and that allow the Health and Human Services (HHS) Secretary’s power to unilaterally alter what he considers to be unreliable state data. The measure continues to permit the Secretary to claw back what he determines to be “excessive” funding by reducing later payments without a prior hearing; in the event of state evidence of underpayment, the Secretary can withhold federal funds owed until a lengthy appeals system is exhausted.

As was the case with the prior version, the new draft tips its hat toward non-expansion states, further sweetening the pot by tweaking the disproportionate share hospital payment formula in ways that favor payments to states with the highest uninsured populations (§ 126, Restoring Fairness in DSH Allotments). Like its predecessor, the new version thus rewards states that have refused to insure their poorest residents and harshly penalizes struggling hospitals serving the remaining uninsured in those that have.

As an additional lure, the new version expands the block grant option in the earlier measure to enable states to use block grants for the ACA expansion population as well as for traditional low-income adults (§ 133). Like the earlier version, state block grant funding would remain virtually frozen, leaving states increasingly on the hook for care for millions of grievously under-funded adults.

The Illusion Of A Public Health Emergency Exemption To The Per Capita Cap

One of Medicaid’s most important dimensions is its irreplaceable role in addressing the immediate and long-term effects of public health crises. Medicaid is by far the nation’s biggest single source of health care financing for dealing with critical public health threats. These threats may begin with an initial, recognized period of a formally declared emergency. They then can morph into events with very long-term effects felt for years or decades after. This was the case with the World Trade Center attacks, which led to an immediate surge in health care spending, followed by years of elevated spending to address the long-term health fallout triggered by the emergency itself. One need think only about Zika or the opioid crisis now gripping the nation to understand the near-term/long-term nature of public health threats.

Medicaid enrollees are disproportionately likely to live in poor communities, and poor communities are disproportionately likely to face public health threats ranging from environmental hazards to infectious disease. These communities also are inherently less likely to have fewer resources to cope with the effects of an emergency. Thus, a program such as Medicaid is crucial in its ability to deploy health care financing resources to the hardest-hit populations. Indeed, two thirds of all Louisiana Medicaid beneficiaries lived in the parishes affected by Hurricane Katrina.

Section 319 of the Public Health Service Act authorizes the HHS Secretary to declare the existence of a public health emergency arising from events such as a “disease or disorder,” “significant outbreaks of infectious diseases or bioterrorist attacks,” or other events identified as public health emergencies by the HHS Secretary. Whether to declare an emergency is entrusted to the Secretary’s judgment, and during the immediate emergency period, the Secretary enjoys expanded powers to deploy resources to designated populations or geographic areas. These special powers end when the declared emergency period ends. In the aftermath, states and local communities effectively are on their own, relying on the resources they have.

In and of itself, a loss of federal health funding as large as that imposed by BCRA elevates the threat risk. This risk grows exponentially when a true crisis hits, if Medicaid is crippled in its ability to provide a large-scale surge in public health care spending both during the emergency and thereafter. To understand how little the revised bill does to mitigate the crippling impact of the initial draft one need only look carefully at what the revisions would do when a true emergency strikes.

The press release accompanying the new draft states that “if a public health emergency is declared, state medical assistance expenditures in a particular part of the state will not be counted toward the per capita caps or block grant allocations for the declared period of the emergency.” But a close read of the actual bill text reveals its fundamental inadequacy.

First, the period of exemption lasts only five years, from January 1, 2020 through December 31, 2024. Emergencies happening after this date won’t qualify for the spending adjustment. Second, the bill provides no additional federal spending during the period of a declared emergency. The draft simply allows states to eventually qualify for additional federal funding in the years following the emergency if they can prove to the Secretary that their spending on the affected population went up compared to prior years and then only for immediate emergency costs. What state will have the money in advance? And what state will be able to take a chance on spending more given the purely speculative nature of whether an emergency will be declared and emergency expenditures recognized?

Third, states would receive no additional funding ever unless the HHS Secretary actually declares an emergency in the affected portion of the state or for the state’s affected populations. Many public health threats may not rise to a level that triggers a formal Secretarial determination, and the Secretary may be inclined not to make such a determination because of other, spillover effects that come with such a determination, such as the elevated demand for other types of resources.

Fourth, the additional amount of federal funding made available would be limited to the difference between what the state spent on the population in connection with the emergency and the state’s previous expenditures for the same population. Expenditures to cope with the emergency aftermath would not count, and of course these expenditures likely would not occur simultaneously with the emergency expenditures. For example, Zika has triggered emergency expenditures aimed at preventing the spread of the virus, but the true costs of Zika will roll out slowly in the form of babies left permanently and severely disabled by the virus.

And here is where the public health implications of BCRA become clear: other than exempting state expenditures on children classified as disabled from the caps, the revised bill, like its predecessor, makes no adjustment for long-term consequences. To be sure, as just mentioned, BCRA does exempt state expenditures on severely disabled children from the federal cap. But because the vast majority of children qualify for Medicaid based on poverty, this type of cramped classification system for measuring exemptions is sure to exclude spending for millions of children in severely compromised health from the exemption process.

Fifth, the bill allows only $5 billion in the aggregate for all additional federal funding over the five-year time period covered by the emergency exemption. In other words, the bill essentially creates a five-year, $5 billion mini-block grant to help all states address Medicaid spending for all emergencies occurring during this time period. The incredibly small size of the block grant alone would be likely to incentivize the HHS Secretary to avoid declaring emergencies out of concern that the money won’t be there to cover them.

In the end, the newest iteration of BCRA does nothing to alleviate the catastrophic effects of its predecessor: the difference in magnitude between what Medicaid can do today and what it will be capable of doing in the future is incalculable.

How the American Health Care Act’s Changes to Medicaid Will Affect Hospital Finances in Every State

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http://www.commonwealthfund.org/publications/blog/2017/jun/how-changes-to-medicaid-will-affect-hospital-finances-in-every-state

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The American Health Care Act (AHCA), as passed by the U.S. House of Representatives, will reduce federal spending on Medicaid by more than $834 billion over the next 10 years. And the recently released Senate bill appears to cut Medicaid even more deeply. In addition to repealing the Medicaid expansion, the bills place caps on the federal dollars that states receive to provide health insurance to millions of low-income Americans, including the elderly, disabled, and people with opioid addiction.

We modeled the impact of this loss of Medicaid funding on U.S. hospitals and found that, over the next 10 years, hospitals in all states, but especially hospitals in Medicaid expansion states, will see an increase in uncompensated care—a treatment or service not paid for by an insurer or patient. We also saw declines in hospitals’ operating margins, particularly among hospitals in expansion states. Rural hospitals in nonexpansion states also would face marked operating margin decreases.

In the interactive state-by-state maps below, we present the estimated impact of the Medicaid provisions in the House-passed AHCA on the finances of all U.S. hospitals. The hospitals in the District of Columbia and the 31 states that expanded Medicaid are projected to see a 78 percent increase in uncompensated care costs between 2017 and 2026. Eleven of these states will see uncompensated care costs at least double between 2017 and 2026. For example, Nevada hospitals will see a 98 percent increase, West Virginia a 122 percent increase, and Kentucky a 165 percent increase.

In addition to growing uncompensated care, our projections indicate that under the AHCA, hospitals in most states will experience a decline in Medicaid revenues, even though the law restores Medicaid disproportionate share hospital (DSH) payments. Hospitals in Medicaid expansion states may experience a 14 percent drop in Medicaid revenues between 2017 and 2026, compared to a 3 percent anticipated reduction among hospitals in the 19 states that did not expand. Some states may see more dramatic drops. Arkansas hospitals, for example, are estimated to see a 31 percent decline in Medicaid revenue over the next 10 years.

 

Medicaid Financing: The Basics

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http://kff.org/report-section/medicaid-financing-the-basics-issue-brief/

Figure 1: Medicaid costs are shared by the states and the federal government.