Reps Eye Delay for Medicaid Disproportionate Share Hospital Cuts

Three House Representatives recently called on their Congressional peers to postpone implementing a rule that would reduce Medicaid Disproportionate Share Hospital (DSH) payments starting on Oct. 1, 2017.

The bipartisan letter from Representatives Eliot Engel (D-NY), John Culberson (R-TX) and Steven Palazzo (R-MS) explained that the scheduled supplemental payment cuts would create a $2 billion financial shortfall among safety-net hospitals in 2018. This shortfall would jeopardize their ability to treat low-income and vulnerable populations.

“Medicaid DSH payments allow hospitals nationwide to treat our most vulnerable Americans. We urge you to take swift action to delay these harmful cuts for at least two years,” they wrote.

The Reagan Administration designed the supplemental Medicaid reimbursements to financially support hospitals that serve a disproportionate number of low-income and uninsured patients. The payments particularly help safety-net hospitals.

“In treating those who have nowhere else to turn, these hospitals incur substantial uncompensated costs,” the representatives wrote. “Furthermore, these same hospitals typically operate on very narrow, or even negative, margins. Medicaid DSH payments allow them to continue serving our constituents.”

Rural hospitals also benefit from the supplemental Medicaid reimbursements. About 41 percent of rural hospitals operated under negative margins in 2016 all while treating a greater portion of uninsured patients and relying on public payers for a majority of their revenue as well as facing physician shortages, lower employment rates, and worse healthcare disparities than their urban peers.

Safety-net and rural hospitals rely on Medicaid DSH payments to offset high uncompensated care costs stemming from low-income and uninsured individuals. Congress has recognized this in the past by delaying payment reductions, the representatives explained.

The Affordable Care Act contained provisions that mandated CMS decrease Medicaid DSH payments by 2014 to account for reductions in the uninsured population under Medicaid expansion programs and increased health coverage options via health insurance exchanges.

However, Congress postponed the cuts to 2016 through the Bipartisan Budget Act of 2013. The payment cuts were delayed again until 2017 through the Protecting Access to Medicare Act of 2014, then again under MACRA until 2018.

Per the MACRA ruling in 2015, CMS plans to reduce Medicaid DSH payments starting on Oct. 1. The payments are slated to fall $2 billion in 2018 and cuts will grow to $8 billion by 2024.

House representatives asked their peers to again delay the 2018 payment reductions to 2020 or until a permanent solution is created.

“Our nation’s hospitals cannot sustain losses of this magnitude. Institutions will be forced to shutter, leaving our constituents without a safety net,” the letter stated.

HOSPITALS AND HEALTH SYSTEMS ADD THEIR SUPPORT TO THE DELAY

Nine healthcare organizations backed the postponement of Medicaid DSH payment cuts proposed by House Representatives Eliot, Culberson, and Palazzo. Among the industry groups supporting the delays were the American Hospital Association (AHA), America’s Essential Hospitals, Children’s Hospital Association, Premier Healthcare Alliance, and Federation of American Hospitals (FAH).

The industry groups explained to the House and Senate that about one-half of all hospitals receive Medicaid DSH payments to offset uncompensated care costs, which have not decline as expected under the Affordable Care Act.

A 2016 Henry J. Kaiser Family Foundation study showed that uncompensated care costs dropped by $6 billion nationwide after Medicaid expansion programs launched.

However, a recent AcademyHealth analysis revealed that uncompensated care reductions were not enough to counteract lower Medicaid reimbursement received by hospitals. With more individuals covered by Medicaid, hospitals received a greater share of revenue from the public payer, but the reimbursement amounts barely covered actual costs.

The AHA reported in 2016 that Medicaid reimbursement fell short of actual hospital costs by $16.2 billion in 2015.

“Currently, about half of all hospitals in the United States receive DSH payments to address Medicaid underpayment and uncompensated care, which allow them to provide critical community services such as trauma and burn care, high-risk neonatal care and disaster preparedness resources,” the organizations wrote.

Therefore, Congress members should support the bipartisan letter being circulated by the three House representatives and further delay Medicaid DSH payment reductions.

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