MACPAC seeks more gradual phase in of Medicaid DSH cuts

The Medicaid and CHIP Payment and Access Commission's March report to Congress recommends phasing in Medicaid disproportionate share hospital cuts more gradually over a longer period.

The commission also recommends restructuring the DSH allotment methodology distributing the reductions so that they gradually improve the relationship between DSH allotments and each state's nonelderly, low-income population. Additionally, the commission recommended requiring HHS to apply the reductions to unspent DSH funding first.

"The commission is concerned that the magnitude of DSH cuts assumed under current law could affect the financial viability of some safety-net hospitals," a report chapter summary says. "If Congress chooses to proceed with DSH cuts, MACPAC recommends that it takes specific actions to minimize the impact of the cuts on safety-net hospitals and better align the existing allotment methodology with the cost of uncompensated care."

Assuming uncompensated care costs would decrease as the number of insured people increased, the ACA adjusted Medicaid payments for hospitals that serve a disproportionate share of low-income patients. A $4 billion reduction in DSH payments is scheduled for the Oct. 1 start of fiscal year 2020.

But the commission's report noted that while increased coverage under the ACA has reduced unpaid costs of care for the uninsured, "there has been a net increase in hospital uncompensated care costs for DSH hospitals because of an increase in Medicaid shortfall, which is the difference between a hospital's Medicaid payments and its costs of providing services to Medicaid-enrolled patients." 

National healthcare groups, including the American Hospital Association, have continued to urge Congress to delay the cuts. 

The commission's full report, which also addresses upper payment limit supplemental payments to hospitals, is available here.


More stories on healthcare finance:

North Carolina agrees to increase reimbursement rates for rural hospitals
HHS, states discuss instituting Medicaid block grants without Congress
Hospitals in 15 states could take financial hit from Medicaid work requirements

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