Medicaid Provider Taxes in a
Medicaid Expansion Environment
Allied Hospital Associations’
Accounting and Financial Specialists
2013 Spring Meeting
Jim Frizzera, Principal
Health Management Associates
March 19, 2013
April 8, 2015
Hospital Tax Programs
•
Hospital taxes have more than doubled from
2008 through 2012
- 19 States imposed hospital tax programs in 2008
- 40 States imposed hospital tax programs in 2012
•
Increased pressure on direction of hospital tax
revenue
- Medicaid program budget shortfalls
- Medicaid managed care expansion
April 8, 2015
Hospital Tax Programs – FY 2012
WA
MT
VT
ND
NH
ME
MN
OR
ID
MA
SD
WI
NY
MI
WY
NE
NV
PA
IA
UT
CO
KS
AZ
NM
WV
MO
OK
VA
KY
NC
TN
AR
SC
MS
TX
OH
IN
IL
CA
RI
AL
GA
LA
FL
AK
HI
CT
NJ
DE
Has Hospital Provider Tax
Exploring Hospital Provider Tax
No Hospital Provider Tax
MD
DC
April 8, 2015
Hospital Tax Programs – Use of Revenue
• Hospital tax revenue finances:
- Medicaid FFS hospital rates
- Medicaid UPL payments
- Medicaid DSH payments
- Medicaid managed care rates (hospital services and
physician services) and pass-through hospital payments
- UC Pool hospital payments
- “other” Medicaid provider payments
- expanded Medicaid coverage – pre-ACA
April 8, 2015
Medicaid Expansion
• Key Questions
- How many States with hospital taxes will expand
Medicaid?
- Will expansion population enroll in Medicaid FFS or
Medicaid managed care?
- What portion of hospital tax funded Medicaid
payments receive enhanced or 100% federal match?
- How will the Medicaid DSH program be affected by
expansion?
April 8, 2015
Medicaid Expansion
•
•
•
•
•
19 of the 24 States expanding Medicaid impose a
hospital tax
4 of the 5 States leaning toward expansion impose
a hospital tax
11 of the 14 States not expanding Medicaid
impose a hospital tax
1 of the 3 States leaning against expansion impose
a hospital tax
All 5 undecided States impose a hospital tax
April 8, 2015
Medicaid Expansion
• Increased FMAP – Proposed regulation
8/17/11
- allows States to choose from 3 methodologies
to determine “newly eligible” expenditures
- did not address supplemental/UPL payments
- response to public comments in final
regulation should clarify federal policy
April 8, 2015
Medicaid Expansion - FFS vs. Managed Care
• Medicaid Fee-For-Service
- Expansion population would drive increased
spending room within hospital upper payment
limits
- Eligible but not enrolled - greater growth in UPL
- Supplemental/UPL payments can be allocated to
expansion population
- Enhanced Federal match on base Medicaid rates
and Medicaid supplemental/UPL payments
April 8, 2015
Medicaid Expansion - FFS vs. Managed Care
• Medicaid Fee-For-Service (cont.’)
- CMS 2004/2005 financing initiative - ensures
Medicaid supplemental/UPL payments will
receive enhanced/100% Federal match
- Supplemental payments considered
component part of overall rate structure
- Federal policy allowed CMS to challenge
Medicaid supplemental/UPL financing under
SPA reviews
April 8, 2015
Medicaid Expansion - FFS vs. Managed Care
• Medicaid Fee-For-Service (cont.’)
- Medicaid UPLs – prospective estimate based
on most recently available data
- CMS has 2 options regarding inclusion of
expansion population in UPL
1. maintain prospective estimate based on reliable
expansion population data (uninsured); or,
2. establish retrospective approach that requires
reconciliation to actual experience
April 8, 2015
Medicaid Expansion - FFS vs. Managed Care
• Medicaid Fee-For-Service (cont.’)
Prospective UPL estimate
- consistent with existing federal policy
- requires reliable data that may not exist
- DSH audit findings too old – 3-year look
back
- unlikely CMS will permit prospective
approach
April 8, 2015
Medicaid Expansion - FFS vs. Managed Care
• Medicaid Fee-For-Service (cont.’)
Retrospective UPL approach
- would ensure accuracy of utilization for expansion
population
- potential exposure on trend for existing populations
- could take a year or more to adjust based on actual
expansion population experience
- would require State plan to authorize UPL
reconciliation payments
April 8, 2015
Medicaid Expansion - FFS vs. Managed Care
• UPDATE
3/18/13 – All State Medicaid Director’s Letter
- Federal and State oversight of Medicaid
expenditures
- requires annual s submission of IP, OP, and
NF UPL beginning FY 2013
- other provider UPLs beginning FY 2014
(clinic, physician, RTC, and IMD)
- MACPRO – electronic SPA process
April 8, 2015
Medicaid Expansion - FFS vs. Managed Care
• Medicaid Managed Care
- no supplemental/UPL payments
- enhanced Federal match on PMPMs
- some hospital taxes fund increases to
PMPMs for hospital services
– health plans should not be able to retain
equivalent increases to PMPMs for expanded
population - should be distributed for hospital
services consistent with existing practices
April 8, 2015
Medicaid Expansion – Hospital Impact
• Increase to net revenue gain
- enhanced/100% Federal match for services previously
unreimbursed or subsidized by hospital tax-funded DSH
• Greater net gain opportunity under FFS
expansion
- direct payment authority
• Increase to hospital revenue tax base
- tax liability will grow over time
April 8, 2015
Medicaid Expansion – Use of Hospital Tax Revenue
•
Use of hospital tax revenue to fund expansion
- redirection of and/or increase to existing hospital tax
revenue
- new hospital tax program
•
Arizona – “Expansion State”
- previously covered childless adults with full benefits prior
to enactment of ACA - receives “enhanced” Federal match,
but not 100%
- funding the non-federal share of the new expansion and
portions of prior expansion with a new hospital tax program
April 8, 2015
Medicaid DSH
•
The ACA requires the Secretary to establish a
methodology that applies the largest percentage DSH
reductions on the States that—
- have the lowest percentages of uninsured individuals
(determined on the basis of data from the Bureau of the Census,
audited hospital cost reports, and other information likely to yield
accurate data) during the most recent year for which such data are
available; or
- do not target their DSH payments on hospitals with high
volumes of Medicaid inpatients hospitals that have high levels of
uncompensated care (excluding bad debt).
April 8, 2015
Medicaid DSH
•
The ACA also requires the Secretary to:
- apply a smaller percentage reduction on low DSH
States
Alaska, Arkansas, Delaware, Idaho, Iowa, Minnesota, Montana,
Nebraska, New Mexico, North Dakota, Oklahoma, Oregon, South
Dakota, Utah, Wisconsin, and Wyoming
- take into account the extent to which the DSH
allotment for a State was included in the budget
neutrality calculation for a coverage expansion
approved under section 1115 as of July 31, 2009
April 8, 2015
Medicaid DSH
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The Secretary must issue the Medicaid DSH
reduction methodologies in proposed regulations
and solicit public comment
The Medicaid DSH reductions cannot take effect
until a final regulation is issued
No regulatory guidance has been issued to date.
Medicaid DSH audit clarification issued in
proposed form on 1/18/12 – no final rule
published to date
April 8, 2015
Medicaid DSH
•
ACA phases down Medicaid DSH according to the
following schedule beginning October 1, 2013:
2014 -- $500 million
2015 -- $600 million
2016 -- $600 million
2017 -- $1.8 billion
2018 -- $5 billion
2019 -- $5.6 billion
2020 -- $4.0 billion
April 8, 2015
Medicaid DSH
• Federal 2011 Medicaid DSH allotments
totaled $11,288,052,532
• Annual percentage reduction:
2014 -- $500 million – (4.43%)
2015 -- $600 million – (5.32%)
2016 -- $600 million – (5.32%)
2017 -- $1.8 billion – (15.95%)
2018 -- $5 billion – (44.29%)
2019 -- $5.6 billion – (49.61%)
2020 -- $4.0 billion – (35.44%)
April 8, 2015
Other Hospital Tax Program Issues
• President’s 2012 and 2013 Budget –
Provider Tax Phase-Down
• Medicare Provider Tax Cost Policy
• Medicaid DSH in net patient revenue
tax base.
• New IP and OP rate methodologies
causing variance in payment distribution
April 8, 2015
Sources:
1.
2.
Kaiser Commission on Medicaid and the Uninsured: Moving
Ahead Amid Fiscal Challenges: A Look at Medicaid Spending,
Coverage and Policy Trends. Results from a 50-State Medicaid
Budget Survey for State Fiscal Years 2011 and 2012, October
2011.
Medicaid Presentation for Allied Hospital Associations’
Accounting and Financial Specialists Spring 2013 Meeting: Laura
Tobler, National Conference of State Legislatures.