CMS Rule Limits Payments to Disproportionate Share Hospitals
CMS final rule defines ‘uninsured,’ allowing Medicaid patients with exhausted applicable state coverage limits to be covered.
- Effective December 31, disproportionate share hospitals (DSH) will be subject to the Centers for Medicare & Medicaid Services (CMS) final rule when calculating the DSH hospital-specific payment limit. CMS final rule defines the phrase “uninsured,” which previously had been open to interpretation, as “individuals who are Medicaid-eligible or have no health insurance (or other source of third party coverage) for the services furnished during the year.”
This definition that CMS provided will allow Medicaid patients with exhausted applicable state coverage limits to be covered for inpatient and outpatient hospital services. The costs of these services are now permitted to be included in calculating the Medicaid shortfalls. This definition also allows uncompensated care provided to hospital patients with exhausted private insurance benefits or lifetime insurance limits to be counted as uninsured costs.
The calculation of DHS hospital-specific payment limit is developed per state, for each hospital within the state as outlined within the final rule:
As defined in section 1923(g)(1) of the Act, the state’s methodology must calculate for each hospital, for each fiscal year, the costs incurred by that hospital for furnishing inpatient hospital and outpatient hospital services during the applicable state fiscal year to Medicaid individuals and individuals who have no health insurance or other source of third party coverage for the inpatient hospital and outpatient hospital services they receive, less all applicable revenues for these hospital services.
The final rule’s ability to allow additional coverage should come as a relief to the DSH program which helps to serve a significantly disproportionate number of low-income patients and receive payments from CMS to cover the costs of providing care to uninsured patients.
Earlier this year, a report from Health Affairs anticipated the possibility of a reduction in payments to these hospitals by roughly $35.1 billion between the fiscal years of 2017 and 2024 because of the Affordable Care Act (ACA) and Congressional action.
According to the Henry J. Kaiser Family Foundation’s brief, there will be a reduction in federal Medicaid DSH allotments based on the assumption of increased coverage and reduced uncompensated care costs under the ACA. As such, the statute requires that the annual state DSH allotments, and payments to states be reduced to implement these annual reductions.
In addition to its issuance of the final rule, CMS also published a notice detailing adjustments to the Federal Medical Assistance Percentages (FMAP), Enhanced FMAP (eFMAP) and disaster-recovery FMAP for fiscal year 2016. The new rates are adjusted for Section 2101(a) of the Affordable Care Act which amended Section 2105(b) of the Social Security Act to increase the enhanced FMAP for states by 23 percentage points in Children’s Health Insurance Program (CHIP), but not to exceed 100 percent, for the period from Oct. 1, 2015, and ending on Sept. 30, 2019 (fiscal years 2016 through 2018).
