A federal Medicaid advisory panel wants Congress to slow down reductions in payments to disproportionate-share hospitals and change an outdated methodology used for allocating spending under the program.
The Medicaid and CHIP Payment and Access Commission (MACPAC) on Thursday voted 16-1 to include its recommendations on DSH payment changes into its annual report sent to Congress later this year.
Currently DSH cuts are expected to go into effect in October, the start of federal fiscal 2020. DSH payments are expected to be cut by $4 billion in October 2019 and $8 billion per year through fiscal years 2021through 2025.
MACPAC recommended phasing in the cuts more gradually, decreasing funding by $2 billion this October. The cut would increase to $4 billion in fiscal 2021, $6 billion in 2022 and $8 billion a year in fiscal 2023 through 2029.
Easing the DSH cuts will give hospitals and states more time to mitigate the impact of the funding decrease, the commission said.
Congress may delay the DSH cuts as well. The payment changes were supposed to go into effect in federal fiscal 2019 but were delayed by Congress in a budget bill passed in February 2018.
The panel also approved a recommendation for Congress to revise federal law to apply the cuts to states with projected unspent DSH allotments before decreasing funding to other states.
States that don’t spend their full allotment for DSH will have whatever is unspent deducted in the next year.
This approach will minimize the cuts in DSH funds paid to providers. According to MACPAC, $1.2 billion in DSH allotments went unspent in fiscal 2016.
“The amount of unspent funds has been relatively consistent over the past several years,” the panel’s recommendation said.
But some panel members were concerned about another recommendation that changes how DSH funding is allocated to states.
MACPAC recommended that HHS develop a new methodology to spread out the cuts so that states with a high number of low-income individuals get a lower cut. The methodology would also adjust for differences in hospital costs in different geographic areas, the panel added.
“The number of low-income individuals in a state relates to hospital uncompensated care costs and is independent of state policy choices,” the panel’s recommendation said.
This would be a drastic change from the current system of how DHS payments are allocated to states. Currently a DSH allotment is based on spending from 1992 and adjusted for inflation.
But several panel members said that state policy choices do have an impact on the uncompensated care costs. They wanted the uninsured rate to be the factor of the methodology instead of using low-income population.
Charles Milligan, CEO of the Medicaid managed care organization UnitedHealthcare Community Plan of New Mexico, said that if a state doesn’t expand Medicaid under the Affordable Care Act then it could impact uncompensated care for hospitals.
Other commission members said that the uninsured rate needs to be factored into the methodology.
“I do believe the uninsured rate, which does have a strong correlation to uncompensated care, is something that is fundamental,” said Darin Gordon, president of the consulting firm Gordon & Associates. Gordon was the lone “no” vote on the slate of recommendations.