The Affordable Care Act (ACA) requires significant cuts to Disproportionate Share Hospital (DSH) payments beginning in federal fiscal year 2014.  These payments compensate hospitals for the cost of providing uncompensated care to uninsured and underinsured individuals.  Congress imposed the cuts on the theory that ACA reforms, such as expansion of Medicaid to additional low-income populations, would decrease the number of individuals without health insurance, thus decreasing the amount of uncompensated care provided by hospitals.

The Supreme Court decision on the constitutionality of the Medicaid expansion made it optional for states.  The Court did not, however, address the DSH cuts.  A number of states have announced that they will not expand Medicaid, and policymakers in other states, including Ohio, continue to vigorously debate the issue.  States that choose not to expand Medicaid may not see the reduction in the number of uninsured that expansion states will.  Since the ACA links the cuts in part to states’ relative levels of uninsured, one consequence is that states that choose to expand Medicaid could see a larger reduction in DSH funds than those that do not.

The ACA specified the aggregate amount of annual DSH cuts ($18.1 billion through 2020), but outlined only general principles for how the cuts would be implemented and required the Secretary of Health and Human Services to design a methodology for the cuts based on those principles. Currently, each states receives an annual allotment of DSH funds and has a great deal of discretion on how to allocate those funds to hospitals within the state.  The ACA specified that the methodology designed by CMS must impose smaller reductions on low DSH states (as defined in statute) and larger reductions on states with the lowest percentages of uninsured individuals and those that do not target DSH payments to hospitals with high volumes of Medicaid inpatients or high levels of uncompensated care.  Finally, CMS must take into account any DSH allotment amounts that a state included in a budget neutrality calculation for a coverage expansion approved under a Section 1115 waiver.

CMS has proposed a methodology that would allocate cuts to state DSH allotments in FY 2014 and 2015.  The total required cuts ($500 million for 2014 and $600 million for 2015) would be allocated proportionately between high DSH and low DSH states.  Then CMS would calculate a reduction for each state by applying a formula that gives equal weight to factors that represent the state’s insured numbers relative to other states and the extent to which it targets DSH funds to high Medicaid volume and high uncompensated care hospitals.  Applying the proposed methodology, CMS estimates that Ohio’s DSH allotment would be reduced by $23.4 million in FY 2014, a reduction of 5.41 percent from what it otherwise would receive for that year.

In the preamble to the proposed rule, CMS addresses the dilemma regarding states that do not adopt the Medicaid expansion, noting that it needs additional information on the impact of state decisions to implement the expansion.  Further, CMS asserts that the data necessary to address the issue may not be available until 2016.  Therefore, CMS proposes to apply its methodology for FY 2014 and 2015 and to address FY 2016 and beyond in future rulemaking.

In recent months, the partners in the Ohio Medicaid Expansion Study, which include HPIO, the Ohio State University, the Urban Institute, and Regional Economic Models, Inc., have released several publications highlighting the Study’s independent analysis of the likely impact of Medicaid expansion on Ohio.  As reported by HPIO, the analysis indicates that:

• Expansion would create savings and new revenue that would exceed the cost to the state, resulting in an additional estimated $1.8 billion to $1.9 billion in net fiscal gain in the nine-year period between 2014 and 2022.
• An additional 450,000 Ohioans would gain health coverage because of the expansion.
• All 88 counties would realize a drop in the uninsured rate, an increase in tax revenue, and an increase in employment due to expansion.

HPIO’s website includes a variety of other helpful resources on Medicaid expansion and Medicaid more generally.

The presentation will discuss:

• Impact of the following on providers:
  • Budget proposals affecting the behavioral health, developmental disability, child welfare, and juvenile justice systems
  • Budget proposals affecting provider compliance requirements
  • The proposed Medicaid expansion
• Update on key Ohio Medicaid-related projects, including health homes, the integrated care delivery system, managed care, and Ohio’s plan to streamline the Medicaid eligibility system.

Speakers: Maureen Corcoran, Daphne Saneholtz, and Suzanne Scrutton

To RSVP or for more information, contact Kayla Allen at ksallen@vorys.com.

Log-in information will be provided before the session. The presentation will be followed by Q&A.

Vorys’ 2013 Health Care Webinar Series includes monthly programs focused on the changing legal, regulatory, and policy issues facing the health care industry.

Expanding Medicaid will provide health coverage to many of the 1.5 million Ohioans with no way to pay for health care and no reliable access to medical treatments.  According to the Ohio Alliance for Health Transformation, it is estimated that approximately 600,000 Ohioans will gain coverage under the expansion.  Also, the expansion will result in more than $23.8 billion in additional federal funds flowing into Ohio’s economy through 2019.  This money will support Ohio’s health care economy, including hospitals, health systems, and their employees.  Importantly, the expansion will also mean that Ohio’s economy benefits from a healthier workforce.

According to the Governor’s Office of Health Transformation, the Governor is proposing new Medicaid cost sharing requirements for every adult earning more than 100% of the FPL.  The state will require an $8 copayment for use of an emergency department for non-emergency conditions, $8 co-pays for nonpreferred drugs, and $3 co-pays for preferred drugs.  Certain long-term maintenance drugs (such as insulin) will have no co-pay.  Additionally, the Executive Budget includes an automatic opt out trigger so that if for any reason the federal government reduces its enhanced financial participation for expanded coverage, then the program for newly eligible groups shuts down.

Governor Kasich made this announcement as part of his 2014-2015 executive budget proposal.  The matter, along with all other budget proposals, next moves to the General Assembly for debate.

Under the ACA, states are required to expand their Medicaid programs to cover many individuals earning incomes up to 138% of the Federal Poverty Level (FPL), or about $31,809 for a family of four.  States that expand their Medicaid programs to include individuals earning up to 138% of the FPL will receive enhanced federal reimbursement for this population – 100% initially, eventually moving down to 90%.  The regular federal match rate for Medicaid varies by state from 50% to 78%. 

This summer’s decision by the United States Supreme Court, however, made the Medicaid expansion optional.  Following the decision, states began to explore the idea of expanding their Medicaid programs to cover uninsured individuals earning incomes less than 138% of the FPL; for example, up to 100% of the FPL.

Under the ACA, individuals earning between 100% of the FPL ($20,050 for a family of four) and 400% of the FPL ($80,200 for a family of four) will be eligible for federal subsidies to purchase health insurance in the Health Insurance Exchange.  So some states advocated for expanding Medicaid eligibility up to 100% of the FPL (instead of 138%) in order to cover many currently uninsured individuals, and allowing individuals earning between 100% and 400% of the FPL to purchase health insurance in the Exchange, receiving federal financial assistance to do so.

On Monday, however, Secretary Sebelius made clear that states are not eligible for the enhanced federal funding unless they expand Medicaid eligibility up to 138% of the FPL.  Now that states have this guidance from the federal government, they can continue to understand the financial viability of the decision to expand Medicaid.

Policy experts have expressed differing views as to whether the ACA allows states to expand Medicaid to a threshold less than 138% of the FPL.  One interpretation is that the expansion population constitutes a coverage group that must be treated as a whole.  Another interpretation is that, in light of the Supreme Court’s determination that the expansion is optional, states can choose to cover all or part of the expansion population.  Questions regarding whether a state can seek a waiver to cover part of the expansion group remain. 

On Monday, the Centers for Medicare and Medicaid Services also released a series of Frequently Asked Questions (FAQs) that seeks to assist states in the implementation of the Affordable Care Act.  The FAQs address:

• Exchanges, market reforms and Medicaid
• Dual eligibles and Medicare cost sharing
• Eligibility and enrollment systems
• Eligibility policy
• Coordination across insurance affordability programs
• Section 1115 waiver transitions
• Children’s Health Insurance Program
• Benefits/delivery system
• Federal Medical Assistance Percentages

Read about these changes and others included in the Medicare and Medicaid EHR Incentive Programs Stage 2 final rule on the Vorys HealtHITech Law blog.

Essential health benefit requirements apply to individual and small group plans sold inside and outside of Health Insurance Exchanges.  Health Insurance Exchanges are mechanisms provided for in the ACA that will allow individuals to purchase affordable health insurance.  They are scheduled to launch in January 2014.  The requirements also apply to benefits provided to individuals who will be newly eligible for Medicaid coverage provided as part of the ACA’s Medicaid expansion.  Essential health benefit requirements do not apply to self-insured health plans, the method by which most large companies cover their employees.

According to Kaiser Health News, “The health law lists 10 broad categories of essential benefits, including preventive care, emergency services, maternity care, hospital and doctors’ services, and prescription drugs.  States have latitude within those categories, and so far nearly all have selected as a benchmark for minimum coverage one of the three most popular small group health plans available to residents now.  Because these plans vary and states can tinker with specific benefits to comply with federal requirements, the minimum benefits available to consumers in California will be different from those for people in New York, for example.”

State Refor(u)m provides additional information regarding the benchmark plans states have chosen.  For example, Arizona has selected as its benchmark plan the state employee plan, while New York has decided on a small group plan.  Some states, like North Carolina, have not yet chosen a plan.  Ohio and several other states—including Alabama, Florida, Iowa, Indiana, Louisiana, New  Jersey, Oklahoma, Pennsylvania, Tennessee, Wisconsin, and West Virginia—have indicated that they are awaiting additional federal guidance before making a selection.

On December 16, 2011, the Department of Health and Human Services (HHS) issued a bulletin providing information and soliciting comments on the regulatory approach that HHS proposed to define essential health benefits under the ACA.  HHS has not yet issued final guidance regarding essential health benefits, and is not expected to do so until after the November election

This goal is important for all Ohio children on Medicaid, and there is a special focus on children in foster care.  An article published in Gongwer Ohio (subscription required) indicates that, “The latest state figure on anti-psychotic drug use was from 2007 when about 7% of children and adults on Medicaid were prescribed at least one such medication, Ohio Medicaid Medical Director Dr. Mary Applegate said.  About 22% of foster children are on at least one antipsychotic medication at some point during their foster care, she said.”  As Crystal Ward Allen, executive director of the Public Children Services Association of Ohio, said in the Dispatch story, “Through the initiative, the state will determine which children are receiving more than two psychotropic drugs at a time, their ages and their diagnosis, the maximum dosage, dosage for children.”

Ohio’s announcement comes on the heels of a bulletin published by the Centers for Medicare and Medicaid Services (CMS) in which CMS offers information for states about additional opportunities and resources to address the use of psychotropic drugs in vulnerable populations, including children in foster care.

You can also review VHCA’s PowerPoint presentation on which the Medicaid portion of the teleseminar was based.

Medicare quality and payment reform provisions that could impact assisted living providers-

• Medicare Shared Savings Program
• Reducing avoidable hospitalizations in Medicare
• National Pilot Program on Medicare Payment Bundling

Medicaid programs that could impact assisted living providers-

• Health homes
• Demonstrations to Integrate Care for Medicare-Medicaid Enrollees
• Balancing Incentive Payment Program
• 1915(i) and (j)

Many thanks to Jean Thompson, Executive Director, for allowing us to share information with the Association’s members.