ACA Now

Implementation Status

2012

In early 2012, CMS issued a proposed rule addressing the uninsured definition under the broader Medicaid DSH policy (though did not address this provision explicitly under the ACA).  However, to date, CMS has yet to finalize the proposal, although according to the OMB/OIRA website, a final rule is “targeted” for release in May 2013.  In 2012, GAO published Medicaid DSH-related reports (including a report on state supplemental payments as well as a report calling for enhanced oversight of Medicaid DSH payments).  Note that CMS has published some general background information on this provision of the ACA here.

2013

On Jan. 3, 2013, the President signed into law the American Taxpayer Relief Act (ATRA) (see here for the legislation), which rebases Medicaid DSH payments through FY 2022.

On May 13, CMS issued its proposal enumerating the methodology by which it intends to implement the ACA’s Medicaid DSH reforms.  Of note, the proposed rule enumerates the detailed methodology by which CMS proposes to implement the annual reductions for both FYs 2014 and 2015 (as opposed to simply FY 2014), while proposing additional DSH reporting requirements for use in implementing the DSH health reform methodology.  A CMS fact sheet is available here. Comments on the proposed rule are due by 5pm ET on July 12, 2013.

In a related event, on July 26, 2013, CMS posted a notice, effective August 26, 2013, setting forth the final FY12 and FY13 preliminary Medicaid DSH allotments, including the aggregate DSH allotments to institutions for mental diseases (IMDs) and other facilities.

On Sept. 13, 2013, CMS issued its final rule on Medicaid State DSH allotment reductions in which it defines the DSH Health Reform Methodology and associated reporting requirements it will use to effectuate the ACA-required annual reductions for FY 2014 and FY 2015. CMS indicated that it will engage in separate rule-making regarding future reductions, noting “a two-year methodology accommodates data refinement and methodology improvement.”  A CMS fact sheet provides an overview of the final rule.

As delineated in a Dec. 27, 2013 CMS informational bulletin, the budget agreement, HJ.Res.59, which the President signed on Dec. 26, delays the ACA Medicaid DSH payment reductions for two years (until FY 2016), but as CMS points out, “doubles the reduction that would otherwise have applied in that year.” CMS indicates in the bulletin that it intends to “publish updated FY 2014 DSH allotments in the Federal Register early next year” to account for the changes to the DSH reduction schedule.

2014

On Feb. 27, 2014, CMS issued a notice announcing the preliminary Medicaid FY 2014 DSH allotments, as well as the preliminary FY 2014 DSH limits for institutions for mental diseases (IMDs). CMS clarified that, “[b]ecause there is no reduction to DSH allotments for FY 2014… this notice contains only the state-specific FY 2014 DSH allotments, as calculated under the statute without application of the reductions that would have been imposed under the [ACA] provisions beginning with FY 2014.”

P.L. 113-93, the Protecting Access to Medicare Act of 2014 (PAMA) (i.e., the “doc fix”), which was signed into law on April 1, contains a provision at section 221 that extends the ACA Medicaid DSH cuts to 2024 with an additional 1-year delay of the initial implementation of the cuts from FY 2016 to 2017, and requires MACPAC to review and submit an annual report to Congress on DSH payments. Also, note that on April 7, CMS released new guidance (available here) that pertains to the State Plan Rate Year (SPRY) 2011 Medicaid DSH audits that are due at year-end.

On Sept. 24, HHS’ ASPE released a report estimating that hospital uncompensated care costs will decrease by $5.7 billion in 2014. Specifically, ASPE estimates that 74% of that impact ($4.2 billion; 25% of the states’ baseline uncompensated care spending) will be concentrated in the 25 states (plus DC) participating in ACA-authorized Medicaid expansion as of the beginning of FY14 (note: PA and NH were not included in the estimate).

On Nov. 28 CMS issued a final rule effectuating a 2012 proposal addressing the hospital-specific limitation on Medicaid DSH payments. Specifically, this rule outlines that when auditing DSH payments, the uncompensated care “test will be applied on a service-specific basis; so that the calculation of uncompensated care for purposes of the hospital-specific DSH limit will include the cost of each service furnished to an individual by that hospital for which the individual had no health insurance or other source of third party coverage.” The provisions of the final rule take effect on Dec. 31, 2014 (i.e., thus are applicable to audits due on or after that date).

2016

On Feb. 1, CMS released a notice delineating the final federal-share FY 2013 and preliminary FY 2015 Medicaid DSH allotments. The FY 2013 final DSH allotments are equal to the preliminary FY 2013 DSH allotments released on July 26, 2013. The preliminary FY 2015 DSH allotments are $240 million higher than the preliminary FY 2014 DSH allotments published on Feb. 28, 2014, stemming from “the application of the statutory formula for calculating DSH allotments under which the prior fiscal year allotments are increased by the percentage increase in the CPI-U for the prior fiscal year.”

On Feb. 1, MACPAC released a statutorily required Report to Congress on the Medicaid DSH program (highlights; report). MACPAC recommends that HHS: (1) Collect and report hospital-specific data on all types of Medicaid payments for all hospitals that receive them; and (2) Collect and report data on the sources of non-federal share necessary to determine net Medicaid payment at the provider level.

On May 19, MACPAC commissioners discussed their plans for future work on Medicaid Disproportionate Share Hospital (DSH) payments (slides here) – a discussion which follows the Commission’s February release of a report to Congress on the issue.

On May 23, HHS released its spring 2016 Regulatory Agenda, which includes an anticipated proposed rule on Medicaid Disproportionate Share Hospital (DSH) Allotment Reductions with a January 2017 target date.

On Aug. 12, CMS released a proposed rule addressing the hospital-specific limitation on Medicaid DSH payments and the application of that limit on the annual DSH audits. The purpose of the rule is to clarify existing regulatory text to delineate that “the hospital-specific limit calculation would reflect only the costs for Medicaid eligible individuals for which the hospital has not received payment from any source (other than state or local governmental payments for indigent patients).” Comments are due by Sept. 14, 2016.

On Oct. 25, CMS issued a notice delineating the final federal FY 2014 and preliminary FY 2016 Medicaid DSH allotments. State-specific allotments can be found in addenda one and two, which begin on p. 14 and p. 19 respectively.  The notice provides methodological background information on CMS’ calculations, including statutory delays in applying ACA reductions to states’ Medicaid DSH allotments.

2017

On July 27, 2017, CMS issued a proposed rule delineating a methodology to implement the annual reductions to state Medicaid DSH required by the ACA. The ACA set forth aggregate reductions to state Medicaid DSH allotments annually from FY 2014 through FY 2020, though subsequent legislation delayed the start of these reductions until FY 2018. Under current law, these reductions will run through FY 2025. Comments were due August 28.

2018

In February, Congress passed the Bipartisan Budget Act of 2018 (BBA) (P.L. 115-123), which delayed the statutory cuts to Medicaid DSH hospitals by two years. (See section 53101). Thus, instead of the DSH cuts taking effect in FY 2018, they take effect in FY 2020. The FY 2020 cut would be $4 billion. FY 2021-2025 cuts would be $8 billion per year (CBO: -$185m/10y).

2019

In February, CMS published a notice delineating (1) the final federal share DSH allotments for FY 2017 (see Addendum 1); (2) the preliminary federal share DSH allotments for FY 2019 (see Addendum 2); and (3) the final FY 2017 and the preliminary FY 2019 limitations on aggregate DSH payments that states may make to institutions for mental disease (IMD) and other mental health facilities. Addendum 3 and 4 detail each state’s final FY 2017 and preliminary FY 2019 IMD DSH limit, respectively. Our summary is available here.

On Mar. 15, MACPAC issued its March 2019 Report to Congress. The report, in three chapters, addresses policy and payment considerations related to DSH payments in Medicaid and upper payment limit (UPL) supplemental payments to hospitals. With regard to Medicaid DSH, the Commission outlines a series of recommendations to improve the structure of DSH allotment reductions. Among the recommendations, MACPAC notes that, if Congress chooses to proceed with DSH allotment reductions in current law, it should effectuate statutory changes to revise the schedule of DSH allotment reductions to $2 billion in FY 2020, $4 billion in FY 2021, $6 billion in FY 2022, and $8 billion a year in FYs 2023–2029, in order to phase in DSH allotment reductions more gradually without increasing federal spending. Our summary of MACPAC’s DSH recommendations is available here.

On June 3, the U.S. Supreme Court ruled against, in a 7-1 decision, HHS’ decision to include the count of Medicare Advantage beneficiaries in its calculation for DSH payments for FY 2012 without offering a public comment period. The court ordered HHS to vacate the rule, though it is currently not clear how the agency plans to restore the estimated $3-4 billion in FY 2012 Medicare DSH payments at stake. Our summary is available here.

On June 14, MACPAC released its June Report to Congress in which it discussed treatment of third-party payments in the definition of Medicaid shortfall. Specifically, Chapter 2 outlines the Commission’s response to the district court’s ruling in Children’s Hospital Association of Texas v. Azar. The decision has the effect of allowing hospitals to receive DSH payments to cover uncompensated care costs that are paid for by other payers. Our summary is available here.

On Sept. 23, CMS issued a final rule to implement the ACA-mandated DSH allotment reductions, effective Nov. 22, 2019. Despite the statutorily-slated DSH cuts, the reductions have been delayed several times due to congressional intervention.

On Nov. 12, CMS issued a proposed rule (press release, fact sheet) on Medicaid Fiscal Accountability. CMS said the proposed rule is intended to strengthen the fiscal integrity of the Medicaid program and ensure that supplemental payments and financial arrangements are transparent and value-driven. The proposed rule delineates information collection requirements (ICRs) regarding DSH reporting. Specifically, CMS proposes to require states to provide an additional data element as a part of its annual DSH audit report.

On Nov. 22, President Trump signed a second CR (H.R. 3055) to extend current funding levels through December 20 to avert a government shutdown. Like the previous CR, H.R. 3055 delays Medicaid DSH payment reductions from taking effect and temporarily reauthorizes public health, Medicaid, and Medicare programs. Our summary is available here.

On Dec. 20, President Trump signed two legislative packages (H.R. 1865 and H.R. 1158) fully funding the federal government for the remainder of FY 2020. The legislation delays reductions in DSH payments – $4 billion beginning Dec. 21, 2019 and $8 billion for each of FYs 2021 through 2025 – from going into effect until May 23, 2020. Our summary is available here.