MACPAC Highlights Financial Challenges for Medicaid Providers in Budget-Constrained States

October 5, 2020

At its September meeting, the Medicaid and Children’s Health Insurance Program (CHIP) Payment and Access Commission (MACPAC) discussed various Medicaid and CHIP financing issues, including Medicaid’s role in the COVID-19 public health emergency (PHE). Specifically, the staff and Commission discussed relief funding for Medicaid providers and Medicaid’s response to the pandemic.

MACPAC staff noted that the COVID-19 PHE has impacted the finances of providers in numerous ways. Providers have incurred increased costs from their efforts to prevent the spread of COVID-19 and treat patients with the disease, while they also see decreased revenues due to deferred care, adherence to social distancing protocols, and temporary closures. The financial challenges are particularly severe for providers serving a high proportion of Medicaid beneficiaries as they entered the pandemic with lower operating margins, serve populations disproportionately affected by COVID-19, and depend on payments from states that face their own budget constraints, MACPAC noted.

Also discussed were distributions for eligible Medicaid providers from the $175 billion Provider Relief Fund (PRF), including a $15 billion “Phase 2 General Distribution” for Medicaid and CHIP providers, and dentists and assisted living facilities that were not eligible for funding in the Phase 1 General Distribution. (Note: an additional $3 billion was allocated to the Phase 2 distribution after the MACPAC presentation.) Providers were required to apply for Phase 2 distributions, and MACPAC expressed concern over the low response rate from eligible providers.

PRF distributions from the general, safety net, rural, tribal, and high impact tranches to hospitals amounted to 6.1% of their fiscal year 2018 operating expenses, MACPAC estimated. This proportion was higher for rural and deemed disproportionate share hospitals (DSH) than for urban or non-deemed DSH hospitals. MACPAC also highlighted that states are implementing various Medicaid provider relief options such as advance or interim payments, enhanced payment rates, Upper Payment Limit supplemental payments, and retainer payments.

MACPAC addressed Medicaid’s response to COVID-19 and the program flexibilities Medicaid put in place for telehealth services, substance abuse disorder treatment, and long-term supports and services. Medicaid may allow some of these flexibilities to continue after the end of the PHE.

MACPAC also noted racial and ethnic disparities in Medicaid beneficiaries’ experience with COVID-19. MACPAC’s analysis showed that cases are 2.6 times higher for Black people and 2.8 times higher for Hispanic and American Indian or Alaska Native people compared to white people. Hospitalizations are 4.6 times higher for Hispanic people, 4.7 times higher for Black people, and 5.3 times higher for American Indian or Alaska Native people compared to white people. Additionally, beneficiaries who are dually eligible for Medicaid and Medicare have higher cases and hospitalizations than beneficiaries who are only eligible for Medicare.