MACPAC Advises Restructuring Medicaid DSH Cuts, Improving UPL Oversight

April 8, 2019

The Medicaid and Children’s Health Insurance Program Payment and Access Commission’s (MACPAC) March report to Congress focused on Medicaid disproportionate share hospital (DSH) allotments and Upper Payment Limit (UPL) supplemental payments. UPL payments are permissible supplemental payments made by some states to hospitals, in addition to regular Medicaid fee-for-service payments.

Restructuring Medicaid DSH Allotment Reductions

In response to Congressional interest, MACPAC analyzed the impact of Federal Medicaid DSH cuts (scheduled to begin October 1 under current law) and made recommendations on restructuring the cuts in a budget-neutral manner. While MACPAC expressed concern about the magnitude of the DSH cuts and the impact on some safety net hospitals’ financial viability, it did not address whether the DSH cuts should be reduced and/or restored. Its recommendations were as follows:

  • phase in the reductions more gradually to mitigate the impact on safety net hospitals and allow states more time to adopt alternative Medicaid payment policies to account for the cuts, if they choose
  • apply the reductions first to states with projected unspent DSH allotments
  • modify the distribution methodology for the reductions to improve the relationship between allotments and the number of non-elderly, low-income individuals in a state, adjusted for geographical differences in hospitals’ costs

GNYHA strongly opposes the DSH cuts and any redistribution of DSH allotments that would disproportionately impact member hospitals. GNYHA will continue to vigorously advocate for restoration of the DSH cuts.

UPL Oversight and Data Accuracy

MACPAC also recommended ways to improve oversight of UPL payments to hospitals. States can use supplemental payments to “fill the gap” between regular Medicaid payments and the UPL, or an estimate of what Medicare would have paid for the services. However, MACPAC’s analysis found large discrepancies between Medicaid spending reported on state UPL demonstrations and Centers for Medicare & Medicaid Services expenditure reports, raising concerns about the accuracy of the data used to monitor compliance. MACPAC recommended that the Secretary of Health and Human Services 1) establish controls to ensure that UPL demonstration data are accurate and complete, and 2) make hospital-specific UPL demonstration data publicly available for analysis.