MACPAC to Congress: Roll out DSH cuts first in states with unspent funds

MACPAC submitted its March report to Congress on Friday. (Getty/juststock)

Medicaid and CHIP Payment and Access Commission has submitted its latest report to Congress, calling for legislators to consider tweaking federal law to roll out payment cuts to safety-net hospitals first in states that already have unspent money. 

In the report, MACPAC recommends that Congress amend the Social Security Act to direct the Department of Health and Human Services to apply the cuts first in states with a pot of unspent disproportionate-share hospital funds, as that could make the transition easier for impacted providers. 

Congress should also consider changing existing law to allow DSH payments to more effectively confirm to the need of each state’s population, MACPAC said.


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MACPAC says that its research indicates that, though the architects Affordable Care Act built payment reductions to disproportionate-share hospitals into the law based on more people gaining insurance coverage, uncompensated care burdens haven’t declined significantly. 

RELATED: Federal cuts to hospitals to reach $218B in the next decade, AHA report says 

As such, lawmakers—if they choose to go ahead with the payment cuts—should allow for more time for safety-net hospitals to adjust to the reductions. At present, the DSH cuts are set to kick in next year with a reduction of $4 billion; MACPAC suggests scaling that back to $2 billion in 2020. 

“Although we are concerned that the magnitude of DSH cuts assumed under current law could affect the financial viability of some safety-net hospitals, over the past year, the commission has focused on budget-neutral ways to restructure funding under current law,” Penny Thompson, the commission’s chair and principle of Penny Thompson Consulting, said in an introductory letter. 

MACPAC’s report also closes with its routine analysis of hospitals’ need for DSH payments, and that analysis shows that while hospitals’ bad debt and charity care are on the decline, Medicaid shortfalls are increasing. 

The increase in Medicaid shortfall, MACPAC found, outpaced the decline in uncompensated care costs for the uninsured in 2013 and 2014 at DSH hospitals. 

MACPAC also dived into upper payment limit (UPL) payments, and how this actually outpaced DSH payments as a source of funding for safety-net providers in fiscal year 2017. This model sets an upper limit on payments under fee-for-service, based on what would reasonably been expected under Medicare. 

RELATED: Patients face too many barriers to access medication-assisted treatment, experts tell MACPAC 

In the report, MACPAC recommends that HHS review processes and protocols to ensure the data used to calculate UPL payments is accurate and that these payments are being determined fairly.

“Better data and process controls will help ensure proper enforcement of existing limits and can help inform development of new payment policies that promote efficiency and economy,” MACPAC wrote. 

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