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Understanding Medicaid Hospital Payments and the Impact of Recent Policy Changes

Issue Brief
  1. American Hospital Association, “Table 4.4: Aggregate Hospital Payment-to-cost Ratios for Private Payers, Medicare,” in Trendwatch Chartbook 2015 (Chicago, IL: American Hospital Association, 2015), http://www.aha.org/research/reports/tw/chartbook/2015/table4-4.pdf.

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  2. Deborah Bachrach, Patricia Boozang, and Mindy Lipson, The Impact of Medicaid Expansion on Uncompensated Care Costs:  Early Results and Policy Implications for States (Princeton, NJ: The Robert Wood Johnson Foundation, State Health Reform Assistance Network, June 2015),   http://www.rwjf.org/en/library/research/2015/06/the-impact-of-medicaid-expansion-on-uncompensated-care-costs.html.

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  3. Robin Rudowitz and Rachel Garfield, New Analysis Shows States with Medicaid Expansion Experienced Declines in Uninsured Hospital Discharges (Washington, DC: Kaiser Commission on Medicaid and the Uninsured, September 2015), http://kff.org/health-reform/issue-brief/new-analysis-shows-states-with-medicaid-expansion-experienced-declines-in-uninsured-hospital-discharges.

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  4.   Sayeh Nikpay, Thomas Buchmueller, and Helen G. Levy, “Affordable Care Act Medicaid Expansion Reduced Uninsured Hospital Stays In 2014,” Health Affairs. 35, no. 1 (2016): 106-10, http://content.healthaffairs.org/content/35/1/106.abstract.

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  5. Organizations interviewed for this report included the American Hospital Association, America’s Essential Hospitals, the Connecticut Hospital Association, the California Public Hospital Association, the Medicaid and CHIP Payment and Access Commission (MACPAC), and the Center for Medicare and Medicaid Services (CMS).

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  6. Medicaid and CHIP Payment and Access Commission, “Examining the Policy Implications of Medicaid Non-Disproportionate Share Hospital Supplemental Payments,” chap. 6 in March 2014 Report to the Congress on Medicaid and CHIP (Washington, DC: March 2014), 183-209, https://www.macpac.gov/publication/report-to-the-congress-on-medicaid-and-chip-314/.

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  7. Medicaid and CHIP Payment and Access Commission, “Medicaid Supplemental Payments to Hospital Providers by State, FY 2014” Exhibit 23 in December 2015 MACStats: Medicaid and CHIP Data Book. https://www.macpac.gov/wp-content/uploads/2015/11/EXHIBIT-23.-Medicaid-Supplemental-Payments-to-Hospital-Providers-by-State-FY-2014-millions.pdf

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  8. Ibid.

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  9. Ibid.

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  10. Uwe Reinhardt, “The pricing of U.S. hospital services:  Chaos behind a veil of secrecy,” Health Affairs, 25, no. 1 (2006): 57-69, http://content.healthaffairs.org/content/25/1/57.full.pdf+html.

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  11. American Hospital Association, “Table 4.4: Aggregate Hospital Payment-to-cost Ratios for Private Payers, Medicare,” in Trendwatch Chartbook 2015 (Chicago, IL: American Hospital Association, 2015), http://www.aha.org/research/reports/tw/chartbook/2015/table4-4.pdf.

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  12. AHA estimates that in 2014, Medicare paid 89 percent of costs for Medicare patients and Medicaid paid 90 percent of costs ofr Medicaid patients.  See: American Hospital Association, “Underpayment by Medicare and Medicaid Fact Sheet: Underpayment by Medicare and Medicaid Fact Sheet,” (Chicago, IL: American Hospital Association, 2016) http://www.aha.org/content/16/medicaremedicaidunderpmt.pdf

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  13. MACPAC’s analysis showed similar findings using the Medicare Cost Reports (from among a subset of hospitals with complete data from both sources). Medicaid and CHIP Payment and Access Commission, “Improving Data as the First Step to a More Targeted Disproportionate Share Hospital Policy,” chap. 3, March 2016 Report to Congress on Medicaid and CHIP, (Washington, DC: March 2016), 56-73, https://www.macpac.gov/publication/improving-data-as-the-first-step-to-a-more-targeted-disproportionate-share-hospital-policy/.

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  14. Using data from Worksheet S-10 in the 2013 and 2014 Medicare Costs Reports, we calculated revenue over costs as net Medicaid revenue divided by the product of Medicaid charges and the cost to charge ratio. We restricted the data to just non-federal acute care hospitals that had both 2013 and 2014 data. We adjusted spending amounts to reflect the entire year. We treated blanks in the data as missing data, and did not include them in the rate. Worksheet S-10 (“Hospital Uncompensated and Indigent Care Data”), 2013 and 2014 Medicare Cost Reports, https://www.cms.gov/Research-Statistics-Data-and-Systems/Downloadable-Public-Use-Files/Cost-Reports/Cost-Reports-by-Fiscal-Year.html.

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  15. Bachrach et al., op. cit.

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  16. Rudowitz and Garfield, op. cit.

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  17. Nikpay, Buchmueller, and Levy, op. cit.

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  18. Peter Cunningham, Rachel Garfield, and Robin Rudowitz, How are Hospitals Faring under the Affordable Care Act?  Early Experiences from Ascension Health.  (Washington DC: Kaiser Commission on Medicaid and the Uninsured, October 2014),   http://kff.org/health-reform/issue-brief/how-are-hospitals-faring-under-the-affordable-care-act-early-experiences-from-ascension-health/

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  19. Ibid., Table 5.

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  20.  Using the Worksheet S-10 data from the 2013 and 2014 Medicare Cost Reports, we calculated uncompensated care by summing bad debt costs and charity care costs. As we did when calculating the revenue over costs, we restricted the data to non-federal acute care hospitals that had both 2013 and 2014 data. We also adjusted spending to reflect the entire year. By linking the Medicare Cost Report data to the American Hospital Association Hospital Data, available through the AHA Data Viewer, we identified the location of each hospital. We categorized all states that had expanded by December 31, 2014 as “expansion states” and all others as “non-expansion states.”

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  21. Teresa Coughlin, Sharon Long, Rebecca Peters, Robin Rudowitz, and Rachel Garfield, Evolving Picture of Nine Safety-Net Hospitals:  Implications of the ACA and Other Strategies (Washington, DC: Kaiser Commission on Medicaid and the Uninsured, April 2015),  http://kff.org/health-reform/issue-brief/evolving-picture-of-nine-safety-net-hospitals-implications-of-the-aca-and-other-strategies/.

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  22. America’s Essential Hospitals, “Our View: Essential Hospitals Rely on Medicaid Supplemental Payments,” (Washington DC: America’s Essential Hospitals, March 2016) http://essentialhospitals.org/policy/essential-hospitals-rely-on-supplemental-payments/.

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  23. Christopher Weaver, “Hospitals Expected More of a Boost From Health Law,” Wall Street Journal, June 3, 2015,    http://www.wsj.com/articles/hospitals-expected-more-of-a-boost-from-health-law-1433304242.

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  24. Kentucky Hospital Association, “Code Blue:  Many Kentucky Hospitals Struggling Financially Due to Health System changes,” (Louisville, KY: Kentucky Hospital Association, April 2015) http://www.new-kyha.com/Portals/5/NewsDocs/Code%20Blue%20Report%20Web.pdf.

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  25. Vernon Smith, Kathleen Gifford, Eileen Ellis, Robin Rudowitz, Laura Snyder, and Elizabeth Hinton, Medicaid Reforms to Expand Coverage, Control Costs and Improve Care.  Results from a 50-State Medicaid Budget Survey for State Fiscal Years 2015 and 2016.  (Kaiser Family Foundation and National Association of Medicaid Directors, October 2015) http://kff.org/medicaid/report/medicaid-reforms-to-expand-coverage-control-costs-and-improve-care-results-from-a-50-state-medicaid-budget-survey-for-state-fiscal-years-2015-and-2016/.

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  26. 79 Fed. Reg. 11436 – 11445 (February 28, 2014), available at https://www.federalregister.gov/articles/2014/02/28/2014-04032/medicaid-program-preliminary-disproportionate-share-hospital-allotments-dsh-for-fiscal-year-fy-2014.

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  27. 42 U.S.C. § 1396r-4(f)(7). See https://www.law.cornell.edu/uscode/text/42/1396r-4 .

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  28. Medicaid and CHIP Payment and Access Commission, “Analysis of Current and Future Disproportionate Share Hospital Allotments,” chap. 2, March 2016 Report to Congress on Medicaid and CHIP, (Washington, DC: March 2016), 21-54, https://www.macpac.gov/publication/analysis-of-current-and-future-disproportionate-share-hospital-allotments/.

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  29. Evan Cole, Daniel Walker, Arthur Mora, Mark Diana, “Identifying Hospitals That May Be at Most Financial Risk from Medicaid Disproportionate Share Hospital Payment Cuts,” Health Affairs, 33, no. 11 (2014): 2025-2033, http://content.healthaffairs.org/content/33/11/2025.abstract.

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  30. Katherine Neuhausen, Anna Davis, Jack Needleman, Robert Broook, David Zingmond, and Dylan Roby. “Disproportionate-Share Hospital Payment Reductions May Threaten the Financial Stability of Safety-Net Hospitals.” Health Affairs, 33, no. 6 (2014): 988-996, http://content.healthaffairs.org/content/33/6/988.abstract.

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  31. Office of the New York City Comptroller, Holes in the Safety Net:  Obamacare and the Future of New York City’s Health and Hospitals Corporation, (New York, NY: Office of the New York City Comptroller, May 2015), http://comptroller.nyc.gov/wp-content/uploads/documents/Holes_in_the_Safety_Net.pdf.

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  32. Government Accountability Office, “Medicaid:  Improving Transparency and Accountability of Supplemental Payments and State Financing Methods,” (Washington, DC: Government Accountability Office, November 2015), http://www.gao.gov/products/GAO-16-195T.

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  33. Moira Forbes and Chris Park, “Issues in Medicaid Managed Care Rate Setting,” (Washington DC: Medicaid and CHIP Payment and Access Commission, May 2015) https://www.macpac.gov/wp-content/uploads/2015/05/Issues-in-Medicaid-Managed-Care-Rate-Setting.pdf.

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  34. Alexandra Gates, Robin Rudowitz and Jocelyn Guyer, An Overview of Delivery System Reform Incentive Payment (DSRIP) Waivers (Washington, DC: Kaiser Commission on Medicaid and the Uninsured, September 2014), http://kff.org/medicaid/issue-brief/an-overview-of-delivery-system-reform-incentive-payment-waivers/.

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  35. Jocelyn Guyer, Naomi Shine, Robin Rudowitz, and Alexandra Gates, Key Themes From Delivery System Reform Incentive Payment (DSRIP) Waivers in 4 States (Washington, DC: Kaiser Commission on Medicaid and the Uninsured, April 2015), http://kff.org/medicaid/issue-brief/key-themes-from-delivery-system-reform-incentive-payment-dsrip-waivers-in-4-states/.

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  36. Gates, Rudowitz and Guyer, op. cit.

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  37. Medicaid and CHIP Payment and Access Commission, June 2015 Report to Congress on Medicaid and CHIP, (Washington, DC: June 2015), https://www.macpac.gov/wp-content/uploads/2015/06/June-2015-Report-to-Congress-on-Medicaid-and-CHIP.pdf

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  38. Letter from CMS to Mari Cantwell, Chief Deputy Director Department of Health Care Services, California.  (Washington, DC:  CMS, December 30, 2015).  https://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Waivers/1115/downloads/ca/medi-cal-2020/ca-medi-cal-2020-ca.pdf

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  39. Letter from CMS to Justin Senior, Deputy Secretary for Medicaid, State of Florida, (Washington, DC: CMS, May 21, 2015),  https://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Waivers/1115/downloads/fl/Managed-Medical-Assistance-MMA/fl-medicaid-reform-lip-ltr-05212015.pdf.

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  40. Letter from CMS to Gary Jessee, Associate Commissioner for Medicaid/CHIP, State of Texas.  (Washington, DC: CMS, May 2016).  https://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Waivers/1115/downloads/tx/tx-healthcare-transformation-ca.pdf

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  41. Smith, Gifford, Ellis, Rudowitz, Snyder, and Hinton, op. cit.

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  42. Arielle Levin Becker, “CT Hospitals Say Obamacare Hasn’t Cut Uncompensated Care,” CT Mirror, September 29, 2014,  http://ctmirror.org/2014/09/29/ct-hospitals-say-obamacare-hasnt-cut-uncompensated-care/.

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  43. Interview with Connecticut Hospital Association.

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Appendix
  1. “Cost Reports,” CMS, https://www.cms.gov/Research-Statistics-Data-and-Systems/Downloadable-Public-Use-Files/Cost-Reports/ and “Healthcare Cost Report Information System,” ResDAC, https://www.resdac.org/cms-data/files/hcris.

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  2. “Medicaid Disproportionate Share Hospital (DSH) Payments,” CMS, https://www.medicaid.gov/medicaid-chip-program-information/by-topics/financing-and-reimbursement/medicaid-disproportionate-share-hospital-dsh-payments.html.

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  3. American Hospital Association, “Underpayment by Medicare and Medicaid Fact Sheet,” op. cit.

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  4. Ibid. Telephone conversation with Caroline Steinberg from the AHA Policy Division provided additional information used in notes.

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  5. Medicaid and CHIP Payment and Access Commission, March 2016 Report to Congress on Medicaid and CHIP, (Washington, DC: March 2016), https://www.macpac.gov/wp-content/uploads/2016/03/March-2016-Report-to-Congress-on-Medicaid-and-CHIP.pdf.

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