Short Takes On News & Events

CMS Won’t Penalize Hospitals In States Slow To Expand Medicaid

By Phil Galewitz

May 14th, 2013, 5:57 AM

That sigh of relief you heard Monday was from hospital administrators in nearly two dozen states, including Florida and Texas.

That’s because the Obama administration announced that for the next two years, it doesn’t plan to penalize states that have yet to expand Medicaid coverage under the federal health law by targeting them for reduced Medicaid funding, according to a proposed rule unveiled Monday. That money goes to  hospitals that treat large numbers of poor people.

The health law is funded in part by a gradual reduction in extra Medicaid payments, called disproportionate share hospital, or DSH. Those payments help hospitals that care for a large proportion of poor patients who are covered by Medicaid, or who are uninsured.

The hospital industry agreed to the cuts during the  negotiations over the law on the assumption that expanding coverage to many people who are now uninsured would mean that hospitals would give away less uncompensated care. But since the Supreme Court made the Medicaid expansion voluntary last year, hospitals fear they will lose Medicaid money while at the same time seeing little or no reduction in how much they spend on uncompensated care.

The HHS secretary must come up with a formula that imposes the sharpest cuts on states with the lowest levels of uncompensated care.

Under the law, the $11 billion DSH program will be reduced $500 million next year. But the cuts deepen in 2017 when $1.8 billion is cut, then $5 billion is cut in 2018. How CMS would distribute those cuts has been a major concern for the hospital industry. President Barack Obama asked Congress to delay the cuts until 2015 in his budget proposal early this year, but the fate of the proposal is unclear.

The Centers for Medicare & Medicaid Services proposed on Monday that for the next two years, the DSH dollars be reduced based partly on a state’s percent of uninsured residents (states with the lowest percent of uninsured receive larger reductions). CMS also seeks in the proposal to protect  state DSH funding that is used to increase coverage under Medicaid demonstration waivers.

Rick Pollack, executive vice president of the American Hospital Association, which has sought to delay the cuts, said in a statement, that the proposal was written “in a responsible way based on our preliminary analysis.”

“… since some states have yet to decide whether to expand Medicaid, this proposed rule will not discourage expansion, nor will it penalize hospitals in those states that have yet to make a decision,” Pollack said.

The proposed methodology encourages states to target Medicaid DSH payments to high Medicaid volume hospitals and hospitals with high levels of uncompensated care. CMS said it will revisit its DSH funding cuts formula after 2015.

7 Responses to “CMS Won’t Penalize Hospitals In States Slow To Expand Medicaid”

  1. lawrence says:

    Sadly, we still have Neanderthal state governors and Cro-Magnon state legislatures that can’t understand that their residents have always been and will always be paying federal taxes to support Medicaid. Under the Affordable Care Act there’s a provision called the Medicaid Expansion. Under the Medicaid Expansion, federal tax dollars are designated to be returned to each state. These returned tax dollars belong to each state to fund the Medicaid Expansion at 100 percent for the first three years and gradually reduced to 90 percent over the long term. Most Republican state governors and Republican state legislatures have refused the Medicaid Expansion solely for idealogical and political reasons. When a state governor or a state legislature refuses the Medicaid Expansion, then other states get their share of the Medicaid Expansion funding by default. If residents of a state have already paid federal taxes toward the Medicaid Expansion and if they are required by law to pay for the Medicaid Expansion in the future, why would any state governor or state legislature refuse to have those tax dollars returned to support Medicaid in their state? It’s insane! Yet, it seems insanity rules in most Republican controlled states since they continue to refuse to participate in the Affordable Care Act in any way solely for political and idealogical reasons. Why would any rational person refuse such a gift? Don’t these politicians care about their residents?

  2. Brianne says:

    @Lawrence, Your argument would make sense if you’re facts weren’t wrong. If a state does not expand Medicaid, those dollars do not go to another state, each state gets 90% (as you said) so whether that money comes from state A or state B or states A&B is irrelevant. Each state will still only get 90%. So if state B refuses to expand, the money that is not spent in that state is simply saved and goes towards reducing our national debt.
    Now your other argument, that the federal government is going to pay 90%- well, just think about it for a minute. Where is the federal government getting that money? From taxpayers. Medicaid expansion isn’t a gift; it’s a tax. The federal government is going to tax us, and then give the money back to the underprivileged if and only if it is used for buying (low quality) health services. And the Federal government is so generous they are only going to make states pay for 10% of this tax increase. The Medicaid expansion is nothing but a tax with the purpose of redistributing wealth among the states. Unfortunately for Obamacare supporters, the Supreme Court upheld the constitution and has stopped the federal government from commandeering the states in this way.

  3. Richard says:

    Brianne is not only ungrammatical (“you’re facts”) but also erroneous in her comment. The States initially get 100% federal funding for Medicaid expansion–not 90%, which kicks in later. Medicaid does not redistribute wealth from poorer to wealthier states–given the federal match for Medicaid, which favors lower income states, the program works to redistribute tax revenues to poorer states. Research has found that Medicaid is not “low quality” health care.

    If a state declines to expand Medicaid under the Affordable Care Act, it is foregoing the federal support available for health care to its uninsured and more disadvantaged citizens. Funds have been authorized and appropriated for this purpose; states refusing these funds are not necessarily reducing the deficit. Eventually, someone (including taxpayers) will need to compensate for denying the potential Medicaid expansion population the health coverage and health care they need, which will end up costing the country more because disease and disability will not be prevented by necessary medical intervention. Does it make sense to deny people in need medical attention because they cannot afford it and their state officials have reached a decision that is based only on an extreme ideological position?

  4. So are we going to forget the needy? I am a medcaid provider in Utah and I have no ability to bill through Optum because they are closed to new providers. There are costly temples and costly things in the temples and still my clients are hungary and forgotten.

  5. michael says:

    After reading the posts above by Lawrence, Brianne and Richard and then comparing them with several fact checking web sites, Richard wins hands down on the truth scale. Lawrence comes in a close second. Brianne? If she’s wearing pants, she might want to call the fire department?

  6. mandy says:

    The Medicaid Expansion is not a new federal tax. It’s an existing federal tax. Every tax paying American already supports Medicaid today and they will continue to support the Medicaid Expansion long into the future. It’s the law of the land. The impression given above is that if states refuse the Medicaid Expansion, they will somehow be opting out of paying federal taxes. Refusing to participate in the Medicaid Expansion will only do one thing. Refusing to participate in the Medicaid Expansion will deny non-participating Americans the return of tax dollars that they already paid while participating states will enjoy seeing their tax dollars returned to support a more robust Medicaid in their state. By the way, I agree with Richard. Studies show that Medicaid is not low quality health care. Private plans rank much lower than government plans and private plans cost much more to administer. You need to do some better research.

  7. swampwiz says:

    The GOP really is the Party of Death.