P. Medicaid Supplemental Payments and Financing Issues Presented by Charles A. Luband, SNR Denton US LLP Lance J. Ramsey, Gjerset & Lorenz LLP March 28th 30 th, 2012 1 DISCLAIMER These slides represent the individual submissions of each of the presenters and have been joined into a single presentation. Therefore, no single slide can be presumed to represent the views of all presenters. 2 1
General Medicaid Reimbursement Sources Traditional, fee-for-service Medicaid Waiver Programs Medicaid Disproportionate Share Hospital Program Medicaid Supplemental Payments under Upper Payment Limit Principles 3 Why are Supplemental Payment Programs Different from Traditional Medicaid? States generally finance the fee-for-service (FFS) Medicaid program Other non-traditional Medicaid programs generally target a defined group of providers or services and often use separately-designed financing source as the non-federal share Medicaid UPL programs Waiver Programs 4 2
Medicaid Financing States and Federal Government Share Costs of Medicaid Program Changes under ACA Significant Medicaid expansion and payment reforms Implementation of Accountable Care Organizations Incorporation of Quality measures Coordinated care networks 5 Medicaid Disproportionate Share Hospital Program Issues 6 3
Disproportionate Share Hospital Payments State Discretion in Qualifying Criteria and Payment Methodologies 1% Medicaid utilization percentage requirement Requirement that two physicians are willing to provide non-emergent obstetrical services to Medicaid recipients. Deemed Eligible 25% low income utilization rate Medicaid utilization rate greater than one std dev above mean DSH is the Only Non-Waiver Medicaid Payment Explicitly Permitted to Reimburse for Cost of Care to the Uninsured 7 Medicaid DSH Hospital Specific Limit Calculation DSH Hospitals are entitled to their unreimbursed costs for treating Medicaid and uninsured patients Medicaid Includes inpatient and outpatient services Includes MCO services Includes all payments Uninsured Excludes underinsured Includes state and local indigent programs 8 4
CMS 2008 DSH Final Rule Clarifications: Impact on DSH Cap Only include costs of services to Medicaid and uninsured patients Exclude costs related to the underinsured Include Dual eligibles (both Medicare and Medicaid payments in Medicaid shortfall calculation) Include Medicare secondary payments Exclude physician costs Exclude pharmacy services costs Treatment of Section 1011 Patients What is creditable coverage? 9 Audit Issues Most States have submitted third party audits to CMS for 2005, 2006, 2007, and 2008 Many significant reductions in hospital specific limits Current rules applied to historical years without penalty to illustrate impact Some states concerned about ability to draw down federal allotment Examples of largest issues Provider taxes Bad debt Question: Will state and hospital behavioral changes reduce audit impact? 10 5
CMS 2012 Proposed Rule Impact on DSH Cap The 2008 DSH Final Rule more restrictively defined uninsured by focusing on individuals general status of having any third-party coverage rather than on whether a specific service is covered by the individual s insurance policy. On January 18, 2012, CMS published a proposed rule modifying the definition of uninsured. 11 CMS 2012 Proposed Rule Impact on DSH Cap If enacted, the 2012 Proposed Rule would shift the definition of uninsured to a service-specific coverage determination instead of a general inquiry. The hospital-specific limit would then include: Costs for individuals with coverage who have exhausted their insurance limits Costs for individuals whose coverage excludes a specific hospital service Costs for prisoners only if they are not in secure custody and the responsibility of a state or local law enforcement agency 12 6
ACA & Medicaid DSH Medicaid DSH Allotments Reduced Significantly beginning in 2014 ($500M) By 2020, Medicaid DSH allotments Reduced by over $4 billion The ACA DSH reductions were recently extended for an additional year (2021) by the Middle Class Tax Relief and Job Creation Act of 2012 Secretary must create a DSH Health Reform methodology that imposes largest percentage reductions on states that: Have the lowest percentages of uninsured (during the most recent year for which data are available) or Do not target DSH payments on hospitals with high Medicaid or uncompensated care Reductions must impose smaller percentage reductions on low DSH states and take into account states that use DSH for coverage expansion through a waiver 13 Medicaid Upper Payment Limit Program Issues 14 7
UPL Programs Oklahoma GME & IME Nevada Trauma Program Missouri Federal Reimbursement Allowance New Mexico Sole Community Program All fee-for-service reimbursement 15 Aggregate/Medicare Equivalency Limit Reasonable Estimate PPS vs. Cost-Based Methodology Accounting for Acuity Differences between Medicare and Medicaid Five Standard Questions Recent CMS Scrutiny 16 8
Medicaid Managed Care & Caps Capitated Medicaid managed care utilization reduces state entitlement while providing perceived cost savings and budget neutrality 17 States Looking to Expand Medicaid Managed Care As a result of the reduced revenues and expiration of the enhanced FMAP under ARRA, several states are looking to expand Medicaid managed care programs in an effort to reduce state spending on Medicaid In many cases, the savings attributable to expansion are significantly less than the reduction in Medicaid UPL funding/entitlement 18 9
Preserving Medicaid UPL under Expansion States are seeking solutions that balance their needs to achieve program savings without jeopardizing Medicaid UPL funding streams Waiver programs with Limited Funding Pools Florida LIP, UCPs, DSRIPs Are enhanced Medicaid HMO premiums practically feasible? 19 Financing Medicaid Supplemental Programs Intergovernmental Transfer ( IGT ) Provider Taxes CPEs Bona Fide Provider Donations 20 10
Permissible Financing: Intergovernmental Transfers IGTs Transfer of funds among or between different levels of government Local governments transfer money to the state through IGT State claims federal matching funds for expenditures 21 1115 Waivers Shift to DSRIP in CA November 2010, California granted waiver including Delivery System Reform Incentive Program ( DSRIP ) Pool. DSRIP designed to reward public hospitals for initiatives that improve the availability and quality of healthcare services to the Medicaid and uninsured population and/or reduce the overall costs of such care. Four categories of DSRIP initiatives: Infrastructure development Innovation and redesign Population-focused improvement Urgent improvement in care 22 11
1115 Waivers Shift to DSRIP in TX In December 2011, Texas was granted a waiver to use the California DSRIP model. Unlike CA, Texas plans to apply the DSRIP model to both public and private hospitals participating in Regional Healthcare Partnerships. Many commentators are skeptical about whether the DSRIP model can be effective in coordinating the financing of improvement efforts between public and private hospitals. If DSRIP is successful in Texas, it could spark a national shift in federal reimbursement policy from uncompensated care cost compensation towards healthcare delivery improvements incentives. 23 Retention and Redirection Retention Providers must be permitted to receive and retain full amount of payments Redirection of Medicaid payments Nebulous concept referring to the use of Medicaid payments Mentioned in Cost Limit Rule Preamble 24 12
Issues Permissible Financing: Provider Tax Appropriate class of services Broad-based Uniform Rate No Hold Harmless 25 Winners & Whiners No positive correlation between the tax and a payment Cannot design tax to increase or decrease with Medicaid reimbursement No positive correlation between tax and other payment No kickbacks Missouri OIG Opinion PRRB Decision noting credits not tied to taxes paid 26 13
White House Budget Issues Relating to Provider Taxes Phased-down threshold beginning in 2015 from 6% to 3.5% in 2017 and thereafter Projected to save $5 billion in 2015 Increased reliance on IGTs 27 Permissible Financing: Certify a CPE Must demonstrate CPE is equal to 100% of the Medicaid expenditure Documentation requirements Must be cost-based methodology Less return than IGTs 28 14