• The previously-slated Medicaid DSH allotment reductions have been delayed several times in the past. This section extends the annual $8 billion reduction to begin in FFY 2024 and will last through 2027.

Beginning October 1, 2021, states are required to report specific information regarding non-DSH supplemental payments as a requirement for any Medicaid state plan provisions permitting these payments. A supplemental payment is defined as a “payment to a provider that is in addition to any base payment made to the provider under the state plan.” Examples of non-DSH supplemental payments are upper payment limit (UPL) payments to hospitals, nursing facilities, physicians or other providers in addition to the Medicaid claim payment. 

The new reporting by states to CMS must include the following items:

• The criteria used to determine provider eligibility for the supplemental payment.
• A comprehensive description of the methodology used to calculate the amount and distribution of the supplemental payment to each provider.
  • This must include specific criteria (Medicaid service, utilization, or cost data) used as the basis for the calculation amount or distribution methodology and the timing of the supplemental payments to each provider.
• An explanation of how the state is ensuring such payments adhere to the existing statutory standards of efficiency, economy, quality of care, and access.
• An explanation of the purpose and intended effects of the supplemental payment.
• An assurance that total Medicaid payments for inpatient hospital services, including supplemental payments, will not exceed upper payment limits.¹
• An upper payment limit demonstration, if not already provided.

It is important to note that the Medicaid Fiscal Accountability Regulation (MFAR), which was withdrawn by CMS in September 2020, included similar non-DSH supplemental payment reporting requirements. 

The legislation requires CMS to make the information available publicly on the CMS website.

¹ The legislation does not specify the upper payment limit intended by this provision. However, the withdrawn MFAR rule would have required an assurance that total Medicaid payments will not exceed “the upper payment limits specified in § 447.325”. 42 C.F.R. § 447.325 refers to the limitation on reimbursement for inpatient and outpatient facility services to the customary charges of the provider and no more than the prevailing charges in the locality for comparable services under comparable circumstances.

Third Party Payments

Beginning with the adoption of the 2008 DSH audit rule, the cost of services related to dually enrolled (Medicare and Medicaid or Private Insurance and Medicaid) individuals has been included in the DSH calculation of uncompensated care costs. However, the inclusion of the associated Medicare and other third party payments as a reduction to dually eligible costs has been the center of numerous court cases nationwide. The treatment of these payments has undergone several iterations over the years ranging from offsetting all the payments, to offsetting none of the payments, to only offsetting payments on or after June 2, 2017. This act now only allows the inclusion of costs and payments for services for which the Medicaid state plan or waiver is the primary payor for such services. Therefore, the Act entirely excludes both the costs and payments for services related to dually enrolled individuals from uncompensated care costs.

This revised treatment of dually enrolled individuals closely resembles the approach most states took prior to the release of the DSH audit rule in 2008 and the resulting DSH audits. Most states did not include any of the dually enrolled individual costs or payments prior to the 2008 DSH audit rule. States that have revised their DSH payment methodologies related to dually enrolled individuals in recent years will need to evaluate whether this change results in DSH payments being allocated to hospitals that do not meet the state’s DSH policy objectives. 

Application of Limits for Certain Hospitals

Some hospitals may still qualify for an exception to continue to include the dually enrolled individuals (costs and payments) in their uncompensated care costs as is done currently under the Medicaid DSH limit calculations (as of 1/1/2020), if it results in a higher DSH limit.

To qualify for the exception the hospital must be in the 97^th percentile of all hospitals in the number of Medicare SSI days or percentage of Medicare SSI days to total inpatient days in its most recent cost reporting period.

Medicare SSI days are a statistic commonly used in the Medicare DSH payment calculations so hospitals are familiar with this statistic. However, it has not been commonly used in the Medicaid DSH calculations. Medicare SSI days are days where patients were entitled to benefits under Medicare Part A and to supplemental security income (SSI) benefits (excluding any State supplementary benefits paid with respect to such patients).

The addition of this exception could complicate DSH payment methodologies for states that wish to maximize payments to safety net hospitals during the DSH payment process. There also appears to be a need for additional guidance from CMS related to several issues including clarification of what is meant by most recent cost report period SSI ratio when making DSH payments and performing the DSH examination.

These DSH amendments take effect on October 1, 2021, and apply to payments made during fiscal years beginning on or after such date. It is not clear at this time whether CMS intends to implement this based on federal fiscal year, state fiscal years, or hospital fiscal years. Further guidance will be needed from CMS related to the effective date and whether a pro-ration will need to be made at the time of the DSH audit.

• The Act amends state Medicaid fraud and abuse control requirements to include members/beneficiaries receiving medical assistance under the state plan in a non-institutional or other setting.
• Until this revision, state Medicaid fraud and abuse control units had jurisdiction to investigate matters of patient abuse and neglect in institutional settings, but not non-institutional/other settings. This amendment clarifies that these units have complete jurisdiction to investigate these matters across the Medicaid program.

• The Act amends current state Medicaid plan requirements to ensure members/beneficiaries receiving medical assistance under the state plan must receive necessary non-emergency transportation to and from providers of medical services.
• This revision mandates non-emergency transportation services and further requires the Comptroller General of the United States to study and submit a report to Congress regarding Medicaid program coverage of non-emergency transportation services.
• The report includes: an examination of state safeguards to prevent and detect fraud and abuse within the non-emergency transportation program; an examination of transportation brokers to identify safeguards against fraud and abuse to prevent improper payments for non-emergency transportations; identification of numbers, types, and outcomes of instances of fraud and abuse in non-emergency medical transportation that state MFCUs have investigated; and identification of trends in non-emergency transportation program integrity to inform CMS non-emergency transportation risk management strategies.
• CMS will convene stakeholder meetings to discuss and share best practices for improving Medicaid non-emergency transportation program integrity.