In December of last year (2013), Congress passed a two-year budget deal that delayed the start of the planned cuts to Medicaid disproportionate share hospital (DSH) payments. These cuts, which were originally scheduled to take effect at the beginning of fiscal year 2014, have now been pushed out to the start of fiscal year 2016. However, this extension comes with an expensive catch. The overall level of DSH payment reductions will increase and, once enacted, will extend an additional twelve months – through fiscal year 2023.
DSH payments were established to compensate hospitals for the significantly increased operating costs incurred in the treatment of uninsured, low-income patients. In order to qualify for DSH payments, hospitals must serve a disproportionately large number of uninsured Americans.
The Committee for a Responsible Federal Budget (CRFB), a bipartisan, non-profit organization committed to educating the public about issues that have significant fiscal policy impact, explains that DSH payments are “intended to help compensate those hospitals for having more uninsured patients who may not pay their medical bills and more patients on Medicaid, which generally pays lower rates than Medicare and private insurance.”
The CRFB also states that “without public assistance, hospitals would get stuck with the bill for this uncompensated care, which reached $57.4 billion in 2008, according to the Urban Institute. In 2012, Medicare paid $12 billion through DSH payments and Medicaid paid $11 billion.”
Mandated by the Affordable Care Act (ACA), the DSH payment cuts were expected to be offset by a significant decrease in the number of uninsured Americans seeking treatment as ACA made healthcare coverage more affordable, and as more Medicaid expansion dollars became available for newly eligible adults. To date, this expected decrease has not taken place.
The reasons for the as-yet unrealized decrease in uninsured Americans include:
- Severe and persistent problems with the ACA enrollment site, healthcare.gov, have prevented many who attempted to enroll from doing so. This includes both Americans who would be able to afford coverage and lower-income persons who would qualify for Medicaid.
- A general distrust for and rejection of Obamacare (ACA), especially among young adults.
- Lack of knowledge about the availability of coverage through the ACA.
- General apathy toward the Affordable Care Act.
As a result of these failures, hospitals pushed for the scheduled DSH payment cuts to be delayed – and fortunately – have at least temporarily succeeded in gaining their objective.
“Delaying the DSH cuts is an acknowledgement that enrollment under the ACA has not gone as smoothly as planned,” said Chad Mulvany, director of healthcare finance policy, strategy, and development for Healthcare Financial Management Association (HFMA). HFMA is the nation’s leading membership organization for healthcare financial management executives and leaders.
“The short-term benefit of delaying the DSH cuts is clear,” Mulvany continues. “The impact of the two additional years of sequester cuts is less certain. It’s a long time between now and 2023.”
What happens to DSH payments after 2016?
The HGMA also states that coverage expansions resulting from the full implementation of the Affordable Care Act will eventually yield a significant decrease in the amount of uncompensated care delivered by American healthcare providers.
“For instance,” the organization elaborates, “the RAND Corporation estimated that uncompensated care nationally would decrease by $32 billion in 2016 alone due to the effects of the health care law. Therefore, with fewer payments needed to compensate hospitals, the ACA reduced Medicare DSH payments by $22 billion over 10 years and Medicaid DSH payments by $14 billion. But while the Medicare payment reductions were made permanent, the Medicaid payment reductions were left to expire after 2020. Policymakers have since extended these reductions whenever they want to claim an extra $4 billion in savings to offset new spending, yet it is unlikely that the payments would ever be allowed to increase to their pre-ACA levels.”
How can you maximize DSH payments?
There are numerous tactics your organization can use to maximize Medicaid disproportionate share hospital payments. One of the most effective is capture as many Medicaid-eligible days as is legally possible. This includes looking at patients who retroactively become eligible for Medicaid after your organization’s year-end. Like to know more?
The experts at BHM Healthcare Solutions have the expertise you need to maximize the DSH payments you receive. Contact BHM today:
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