Health Reform WK-EDGE Proposed Medicaid regulations would follow the money on supplemental, DSH payments
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Friday, November 22, 2019

Proposed Medicaid regulations would follow the money on supplemental, DSH payments

By Cathleen Calhoun, J.D.

What will newly proposed oversight rules on certain state Medicare payments require?

New reporting requirements could be placed on states for supplemental payments to Medicaid providers, including supplemental payments approved under either a Medicaid state plan or demonstration authority, and applicable upper payment limits (UPL), according to a Medicaid Fiscal Responsibility proposed rule for CY 2020. The newly proposed regulations would, according to CMS, improve reporting on supplemental payments, clarify Medicaid financing definitions, and reduce questionable financing mechanisms (Proposed rule, 84 FR 63722, November 18, 2019).

Growth of payments. According to CMS, supplemental payments, or additional payments to providers beyond the base Medicaid payment for particular services, have steadily increased from 9.4 percent of all other payments in FY 2010 to 17.5 percent in FY 2017. Also, expenditures for hospital upper payment limit (UPL, which is the maximum payment a state Medicaid program may pay a certain provider type in the aggregate) supplemental payments increased for Medicaid benefits between 2001 and 2016, resulting in $16.4 billion in supplemental payments for 2016.

Proposed regulations. Under the proposed regulations, states would be required to send CMS more detailed data on payments, including supplemental and DSH payments, Medicaid utilization data, and provider taxes and donations. States would also be required to implement new reviews of supplemental payment methodologies and tax waivers and could periodically seek authorization for their renewal (if desired by the state). States must also provide documentation with supplemental payment state plan amendment (SPA) submissions on the goals and evaluation of the payments, under the proposed regulations. The proposed regulations also would allow states to tax services of health insurers without experiencing a reduction in medical assistance expenditures.

Specifically, among other changes, the proposed regulations would make detailed changes to supplemental payments, Medicaid financing and DSH requirements, as well as changes to tax rules.

The new supplemental payment rules would:

  • require states to furnish provider-level payment detail to support the aggregate level information received through UPL demonstrations;
  • require states to report provider-specific payment information on payments received for state plan services and through demonstration programs, as well as identify the specific authority for these payments (i.e. state plan amendment (SPA) or demonstration), and the source of the non-federal share for these payments;
  • allow CMS and states to evaluate the effects of supplemental payments by sun-setting existing and new supplemental payment methodologies after no more than 3 years; and
  • mandate the use of OMB-approved templates and CMS guidelines on acceptable UPL calculations.

The Medicaid financing rules would:

  • establish regulatory definitions for Medicaid "base" and "supplemental" payments;
  • clarify the definitions and processes associated with non-federal share financing arrangements and the UPL ownership categories;
  • re-affirm the statutory requirement that intergovernmental transfers (IGTs) must be derived from state or local tax revenues; and
  • clarify that providers must receive and retain 100 percent of the payment.

Medicaid DSH regulations would:

  • require a quantification of individual audit findings by hospitals and clarify reporting requirements on DSH payments and
  • clarify the overpayment discovery and redistribution procedures associated with DSH payments.

The proposed regulations would also make a variety of tax changes, including allowing health insurers to be considered a permissible tax class.

MainStory: TopStory ProposedRules AgencyNews MedicaidNews ProviderPaymentNews ProgramIntegrityNews

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