By Ted Shaw, President/CEO, Texas Hospital Association
In a world of rapid change, the foundational stability of a business is critical to its survival. A solid financial foundation to support organizational agility and resilience is critical when serious matters such as health — and life — are involved. What if you could not rely on the stability of your local ambulance or fire service?
By the same token, instability tends to have a negative effect on people and organizations. Unexpected events or temporary problems pose significantly greater risks and consequences in unstable environments than in stable ones.
Medicaid reimbursement is an important payer of inpatient and outpatient hospital services across America and contributes to the overall financial stability and outlook of the health care system. But major shifts in reimbursement methods and policies could create shifts in stability.
Texas, like other states, has worked closely with the federal government over the years to identify acceptable methods of financing the non-federal share of Medicaid payments, which are required to draw down the federal matching funds.
But the federal agency over health care services recently proposed a rule that imposes new conditions for Medicaid payment that threatens the stability of states’ Medicaid programs and health care safety nets.
The rule, proposed by the Centers for Medicare & Medicaid Services in November, could limit states’ ability to draw down federal Medicaid payments that hospitals nationwide use to provide essential health care services for Medicaid enrollees and the uninsured.
The rule has the potential to upend Medicaid programs and health care infrastructure across the country, and for Texas, the stakes are high.
Texas is home to approximately 5 million uninsured individuals—the most of any state in the nation. In addition, the Texas Medicaid program provides comprehensive health care coverage for approximately 4 million low-income individuals and those with disabilities, the majority of whom are children.
Hospital reimbursement for care provided to Medicaid enrollees often falls below the actual cost of providing care. In 2016, hospitals’ base Medicaid reimbursement, on average, only covered 67% of inpatient care costs and 68% of outpatient care costs for Medicaid clients. This underpayment leaves Texas hospitals with a multi-billion-dollar Medicaid shortfall.
The combination of Medicaid underpayment and the cost of caring for such a large number of uninsured and underinsured individuals forces a heavy reliance on the hospital supplemental payment program. Supplemental Medicaid payments, through programs such as the Medicaid 1115 Waiver, Medicaid Disproportionate Share Hospital Program and others, make up about two-thirds of Texas hospitals’ total Medicaid payments. With the proposal of the new federal rule, the future of these payments, however, is uncertain.
Like all Medicaid payments, supplemental payments require a non-federal contribution to draw down federal funds. Since the Texas Legislature does not appropriate state funds to cover the non-federal share of supplemental payments, hospitals finance it themselves.
Texas hospitals’ continued ability to finance this contribution and draw down federal Medicaid payments is in jeopardy. The recently proposed rule could threaten approximately $10 billion in supplemental Medicaid payments for Texas hospitals in federal fiscal year 2020.
This instability and unpredictability threaten hospitals’ ability to plan appropriately and, if unresolved, could seriously impact the delivery of health care throughout the state with the closure of several hospitals, particularly in already hard-hit rural areas.
Short of Medicaid reimbursement commensurate with the cost of care, hospitals need the flexibility to finance the non-federal share of Medicaid payments to ensure access to quality health care for all Texans. Texas hospitals are working with stakeholders and state and federal partners to address the rule. Leaders in the health care community are encouraged to stay engaged on this issue, analyze potential impact, and protect access to care for the millions of Texans who depend on it.