CMS’ latest proposal to cap certain state Medicaid payments has drawn immediate pushback from hospital groups, which argue the plan will further decrease access to care and destabilize hospitals that rely on supplemental Medicaid funding.
The agency proposed a rule May 20 that would create new limits for Medicaid state-directed payments and certain fee-for-service payments, aligning them more closely with Medicare rates. CMS said the proposed changes would reduce Medicaid spending by more than $775 billion over 10 years, including $510 billion in federal savings.
Under the proposal, CMS would cap certain state-directed payments for hospital, nursing facility and qualified practitioner services at academic medical centers at 100% of Medicare rates in Medicaid expansion states and 110% of Medicare rates in nonexpansion states for rating periods beginning on or after July 4, 2025. The agency also proposed extending the payment rate limit to all state-directed payments for all services in all states, the District of Columbia and territories for rating periods beginning on or after Jan. 1, 2029.
The American Hospital Association questioned how the policy would be implemented and how it could affect providers’ ability to rely on Medicaid payments.
“Healthcare-related taxes and Medicaid supplemental payment programs are longstanding tools that help address chronically inadequate base Medicaid payment rates, and the changes to these financing systems and related provider payments will have very real consequences for access to care in communities across the nation,” Ashley Thompson, senior vice president for public policy analysis and development at the AHA, said in a May 20 statement. “Projected reductions in funding for essential healthcare services will not only limit access to care for Medicaid patients. When hospitals and providers are forced to reduce services — or even close entirely — everyone in a community is impacted.”
America’s Essential Hospitals also criticized the proposal, arguing it would cut state-directed payments by hundreds of billions of dollars more than the Congressional Budget Office projected.
“CMS’ proposed cuts to state-directed payments go far beyond what Congress intended,” Jennifer DeCubellis, president and CEO of America’s Essential Hospitals, said. “By cutting SDPs by hundreds of billions of dollars more than the Congressional Budget Office projected, CMS will devastate essential hospitals’ ability to provide high quality care to the patients and communities they serve.”
Ms. DeCubellis added that Medicaid state-directed payments are a “financial lifeline” for essential hospitals and help states improve access to care for vulnerable patients.
The Federation of American Hospitals also urged CMS to work with hospitals as it advances the proposal.
“Patients rely on their local hospital to be there for them whenever they need care,” Charlene MacDonald, president and CEO of the Federation of American Hospitals, said in a statement. “A strong, sustainable Medicaid program is essential to maintaining that commitment, especially in rural areas where hospitals are often the largest employer and the only source of care for miles, and state directed payments are a critical part of that equation.”
The proposed rule includes a 60-day comment period. The AHA said it plans to issue a regulatory advisory to members detailing the proposal.
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