MACPAC considers recommending change to definition of 'Medicaid shortfall' at safety net hospitals

At MACPAC's monthly meeting in Washington, a staffer presented recommendations aimed at minimizing the redistribution of DSH payments. (Getty/juststock)

The Medicaid and CHIP Payment and Access Commission is considering whether to recommend statutory changes to the Disproportionate Share Hospital (DSH) definition of a "Medicaid shortfall." 

At issue is the 2018 court ruling which found third-party payments could not be counted in the shortfall calculation and allows hospitals to claim higher Medicaid shortfall even if they receive third-party payments. That decision has been appealed. 

In-state distribution of DSH funds, as well as the limits on DSH payments to individual hospitals, have been affected by the change. 

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In a report at MACPAC's monthly meeting in Washington on Thursday morning, a staffer presented potential recommendations aimed at minimizing the redistribution of DSH payments. 

RELATED: MACPAC continues to ponder value of collaborations between states

The commission—which is a nonpartisan legislative branch agency that makes recommendations to Congress, HHS and the states regarding Medicaid and the Children's Health Insurance Program—could vote on the recommendations as early as its April meeting.

Options presented to the group included including payments from third-party payers in the Medicaid shortfall definition, excluding payments and costs for patients with third-party coverage from the DSH definition of Medicaid shortfall entirely or developing different rules for different types of third-party coverage situations. 

Using words like "absurd" and "ludicrous," commissioners largely appeared to agree that ruling has resulted in wrongly redistributed incentives for the program meant to support safety-net hospitals. 

"Where we are after the court ruling is just nonsense," said Commissioner Alan Weil, who is editor-in-chief of Health Affairs. 

RELATED: MACPAC calls for Congress to delay cuts to safety net hospitals

Commissioner Frederick Cerise, M.S., who is CEO of Parkland Health and Hospital System in Texas, said the problem for hospitals is DSH is zero-sum.

"This is an absurd situation that needs to be addressed," Cerise said. "The current ruling ends up rewarding hospitals with a higher insured rate at the expense of hospital that don’t."

The discussion comes after MACPAC voted last month to recommend Congress phase in planned reductions to Medicaid DSH payments to hospitals over a longer period of time and restructure the DSH allotment methodology based on the number of low-income individuals in a state.

The law currently calls for DSH payments to be cut by $4 billion in fiscal 2020 and $8 billion a year between fiscal 2021 through fiscal 2025.

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