Thank you for the opportunity to appear before the Subcommittee today. Thirty-eight years ago this week, I started my first job on
I would like to clarify at the outset that although I was recently appointed to MACPAC, I am not appearing today on behalf of the Commission. Rather, I am speaking to you today as a health care lawyer with many years' experience representing both the government (as the chief legal officer of CMS and HHS) and health care providers and payers in private practice, and as a former professor of health care law and policy at
I understand that the Subcommittee is in the process of considering the various Medicaid extenders that must be addressed by
That history may be helpful to the Subcommittee as it moves forward with an extenders package. This year, the Subcommittee is called on to address the fact that, absent Congressional action this year, Medicaid DSH payments will be cut by
A. HISTORY OF MEDICAID DSH POLICY
The original DSH policy in the Medicaid program was actually written in this room during the mark-up of the Omnibus Budget Reconciliation Act of 1981. At the time,
As passed by the House, OBRA instructed States to "take into account the special costs of hospitals whose patients are disproportionately Medicaid eligible or without third party coverage." n1 The
B. CURTAILING THE USE OF PROVIDER TAXES AND DONATIONS TO OBTAIN THE STATE SHARE OF MEDICAL ASSISTANCE
This flexibility, however, created the opportunity for States to use provider taxes and donations that contained a hold-harmless feature to derive the State share of medical assistance expenditures. DSH expenditures exploded between fiscal year 1990, when the federal share of DSH funds was
C. ENACTMENT OF THE ACA
By the time that
As initially enacted, the ACA called for a reduction in total DSH allotments of
D. OPTIONS TO ADDRESS PENDING REDUCTIONS
One option that
First, rather than applying a
The second MACPAC recommendation would be to apply reductions to States with unspent DSH allotments before applying reductions to other States. Not all 50 States are using their full DSH allotments; under this recommendation, States with unspent DSH allotments would have their allotments reduced before reducing allotments to other States.
Finally, the third recommendation would be to direct CMS to revise the State-specific DSH caps to better align the relationship between the DSH allotments in a State and the number of low-income non-elderly individuals in that State (after adjusting for hospital costs, using the Medicare area wage index, in different geographic areas). The merit in this recommendation reflects the simple fact that the current DSH allotments relate back to the level of historic DSH spending in a particular State in the early 1990s. But that historic DSH spending may bear little or no relationship to the low-income non-elderly population in that State today. Revising the formula accordingly would better correspond to the original intent of the DSH program as enacted by
n4 Social Security Act [Sec.] 1902(a)(13)(A)(iv).
n5 Social Security Act [Sec.] 1923.
n6 Id. at subsection (b)(1). In general, a State must designate at least two categories of hospitals as DSH: first, any hospital with a low-income utilization rate (a fraction that reflects, in part, the amount of uncompensated care provided by the hospital) of at least 25%. Subsection (b)(1)(A). Second, any hospital with a Medicaid inpatient utilization rate greater than one standard deviation from the mean Medicaid utilization rate of hospitals in the State must be designated as DSH. Subsection (b)(1)(B).
n7 42 C.F.R. [Sec.] 447.272(c)(2).
n9 Pub. L. No. 102-234, 102nd Cong., 1st Sess., 105 Stat. 1793 (
n10 Social Security Act [Sec.] 1903(w)(3)(B),(C).
n11 Pub. L. No. 102-234, supra n. 9, 105 Stat. at 1799 - 1802.
n12 Omnibus Budget Reconciliation Act of 1993 [Sec.] 13621(b)(1), Pub. L. No. 103-66, 107 Stat. 312, 630 - 31 (
n13 Balanced Budget Act of 1997 [Sec.] 4721, Pub. L. No. 105-33, 111 Stat. 251, 511 - 12 (
n15 In 2012, the
n16 In addition to the reductions in the Medicaid DSH allotments,
n17 Health Care Education and Reconciliation Act, Pub. L. No. 111-152 [Sec.] 1203(a)(2), 124 Stat. 1029, 1053 - 55 (
n18 According to the