Changes to Medicaid supplemental payments could follow new state reporting requirements


New rules that would impact Medicaid payments could be on the way, as state reporting changes could lead to bigger base payments and reduced supplemental payments, according to experts.

Providers have long complained that Medicaid base payment rates lag far behind traditional Medicare or commercial insurance, making supplemental payments necessary for safety-net providers to keep their doors open.

Improved state data could shed light on whether Medicaid base payments are high enough. Policymakers are looking to better understand whether supplemental payments benefit safety-net providers and, if that’s true, make a case for boosting Medicaid’s base payment rates. States wouldn’t have to make large supplement payments to providers if base payments were high enough, experts said.

In its massive end-of-the-year spending package last December, Congress directed HHS to create new reporting requirements for states that make Medicaid supplemental payments to providers. The law also requires CMS to make all the reports publicly available on its website. Federal regulators have until Oct. 1 to come up with the rules, which could go beyond what Congress requested.

CMS included similar reporting requirements in its far-reaching Medicaid Fiscal Accountability Regulation last year. But that rule never took effect thanks to pushback from states, providers, patient advocates and congressional lawmakers over its other provisions, which could have thrown billions of dollars and, potentially, existing financing and payment arrangements into jeopardy.

Providers won’t be directly impacted by the reporting changes, but they could be affected if CMS is slow to approve state plan amendments or changes what types of financing and payment arrangements are allowable.

States must report with greater transparency about supplemental payments to specific providers. Those payments go to providers in addition to any base payment made by the state to cover Medicaid patients. This does not include disproportionate share hospital payments. According to the Medicaid and CHIP Payment and Access Commission, supplemental payments are supposed to make up the difference between Medicaid fee-for-service payments and the amount that Medicare would have paid for the same service.

In an interview for this story, former CMS Administrator Seema Verma said the new reporting could also create far more scrutiny of supplemental payments and discussion about what types of arrangements are allowed. Verma oversaw MFAR’s development and eventual withdrawal.

“It’s not clear if those dollars are going back to patient care or going towards something else,” she said.

CMS could eventually go after states for breaking federal rules related to upper payment limits, though experts said the Biden administration likely won’t come down hard on states.

The agency will have to provide more guidance about the financial arrangements states can use to draw down federal matching funds for their Medicaid programs and how providers can spend money from supplemental payments, Verma said.

“This will inevitably force them to do more rulemaking on this issue,” she said.

But that could be easier said than done, said Avi Herring, a senior manager at Manatt Health.

The new reporting requirements won’t include data about base payments, disproportionate share hospital payments or some supplemental payments, including Medicaid managed care pass-through and direct payments.

“Those are really significant portions of supplemental payments,” he said.

States often don’t have information on how providers use supplemental payments either, which could leave policymakers in the dark about whether providers are using the funds for their intended purpose.

Without a complete picture of what’s going on, experts might not be able to compare Medicaid supplemental payments across states. That could make it tough to figure out whether Medicaid’s payment levels are correct or if states and providers are misusing supplemental payments.

CMS could also have difficulty enforcing the new reporting requirements given its limited staff and other resources, experts said. After all, the agency has been trying to get states to improve their Medicaid utilization and claims data for a long time, but many states continue to have issues.

Regulators could force states to follow the new rules by blocking approvals for state plan amendments and waiver requests or even holding up federal matching funds for state Medicaid programs—though again that’s unlikely under the Medicaid-friendly Biden administration.

“If they treat it as a condition of getting your state plan approved, they’ll get state’s attention,” said Cindy Mann, former CMS deputy administrator and a partner at Manatt Health, which is the former employer of the CMS administrator Biden has nominated, Chiquita Brooks-LaSure.

But it’s unclear how CMS might get states to carry out the additional reporting if it isn’t tied to an approval. States can go years without submitting a state plan amendment, so the agency could try to name and shame states into compliance by publicly reporting which states aren’t following the new requirements.

Getting buy-in from states and providers could make enforcement easier. CMS should work with states and providers to figure out how to structure the new reporting requirements to ensure they provide policymakers and the public with helpful information, Mann said.

Meeting with states and providers might also uncover potential reporting issues ahead of time. For example, the pandemic could complicate CMS’ ability to put new reporting requirements into practice because states took a number of emergency measures to keep providers afloat during the public health emergency. And it’s unclear whether the agency will require states to report information related to disaster relief amendments or other emergency measures, Mann said.

In addition, the pandemic might affect states’ ability to correctly report data about supplemental payments because of data lags and fluctuations in utilization and payment levels, Manatt Health’s Herring said.

Mann said nobody is completely happy with supplemental payments, but they won’t go away unless states are willing and able to change how they finance their Medicaid programs.

“It’s easy to say they’ve got issues. But it’s harder to figure out exactly what the issues are. And it’s even harder to figure out how to solve the issues without unraveling some of the financing of the Medicaid program,” she said.

The debate over Medicaid supplemental payments will likely continue for the foreseeable future, experts said.

“But at least it’ll be an informed debate,” said Edwin Park, a research professor at Georgetown University’s McCourt School of Public Policy.



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