Section 2 of the State Medicaid Director Letter addresses changes to the Medicaid shortfall calculations under the amended section 1923(g) of the Act. Section 1923(g) was amended under the Consolidated Appropriations Act (CAA) to establish DSH limits that only include Medicaid primary and uninsured services. CMS has addressed some of the issues related to the amended Medicaid shortfall calculations in this letter.
Calculation of the 97th Percentile Exception
The CAA established a 97th percentile exception allowing hospitals, if it is to their benefit, to continue to include Medicaid secondary claims if the hospital is “in the 97th percentile or above of all hospitals with respect to the number of Medicare supplemental security income (SSI) days … or percentage of Medicare SSI days to total inpatient days.” This Medicaid Director Letter addresses the following items related to the 97th percentile exception:
- CMS acknowledges that there is currently no readily available SSI data to make this determination, however once defined, they intend to make this data available to states for use in state payment methodologies.
- CMS at a minimum confirms that the 97th percentile ranking will be on a national level, and not state by state: “CMS intends to develop a data source to determine whether or not hospitals, ranked on a national level, qualify to meet the 97th percentile exception, consistent with section 1923(g)(2), as amended.”
- CMS confirms that the SSI data will include all hospitals that receive Medicaid DSH including critical access, rehabilitation, and psychiatric hospitals.
- Previously it was uncertain whether CMS would determine if notice-and-comment were necessary, or if they felt the Act was clear enough as written. CMS explains in the letter that they do intend to undergo notice-and-comment rulemaking. Myers and Stauffer is willing to help states draft questions during this comment period to help gain clarity related to the amended DSH limit calculations.
State Plan Amendments
It has been a source of confusion for states as to whether the amended DSH limit calculations should be applied at the time of DSH payments effective October 1, 2021 and how to implement the changes given the outstanding questions related to the SSI data.
- CMS expects states to self-implement the amended DSH limit calculations effective October 1, 2021.
- CMS encourages states to amend their DSH audit redistribution methodologies and DSH payment limit definitions to be consistent with the amendments to section 1923(g). State plan amendments (SPA) need to be submitted by the last of the SPRY to be effective for that year.
Amending state plan methodologies may be complicated due to unanswered questions, including when the new SSI data will be available for DSH payment consideration. Myers and Stauffer can work with states to review the current state plan, determine if changes are necessary, and review the SPA for any additional direction prior to the state’s submittal to CMS for approval.
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