On April 11 and 12, 2024, the Medicaid and CHIP Payment and Access Commission (MACPAC) held a virtual public meeting, which included the following sessions:

• Improving the Transparency of Medicaid and CHIP Financing, and
• Update on Hospital Supplemental Payment Analyses.

The full agenda for the meeting and the presentations for the sessions are available here.

MACPAC DISCUSSES IMPROVING THE TRANSPARENCY OF MEDICAID AND CHIP FINANCING

Medicaid and the Children’s Health Insurance Program (CHIP) are both funded jointly by States and the federal government, which provides matching funds to states based on their Federal Medical Assistance Percentages (FMAP). There are a variety of ways that states can fund the non-federal share of spending, including general funds, heath care specific taxes, and intergovernmental transfers, in which other public entities, such as municipal or county governments, transfer money to the Medicaid program[1]. Transparency around state funding sources is lacking, hindering analysis of Medicaid payments. While states are required to answer five questions[2] about their financing methods when making reimbursement changes to their state plan, including describing the mechanism used by to provide the state share of funding, the answers to these questions are not publicly available. Data on state-level financing is weak; states are required to submit information on provider taxes through Centers for Medicare & Medicaid Services (CMS) Form 64.11, but this information is often incomplete. There are no reporting requirements at the provider level, making it difficult to analyze net payments to providers.

Building upon discussions from previous meetings, commissioners voted on recommendations to address the main gaps present in existing Medicaid transparency requirements, which MACPAC has identified as: lack of publicly available information on financing methods, incomplete state-level data on provider tax amounts, and no existing requirements to report provider-level financing amounts. Recommendations aim to expand on prior MACPAC recommendations to collect provider-level data on financing for hospitals and nursing facilities by including all providers, all types of financing methods, and including both state and provider level financing amounts.

Recommendations are as follows:

Recommendation 1.1

In order to improve transparency and enable analyses of net Medicaid payments, Congress should amend Section 1903(d)(6) of the Social Security Act to require states to submit an annual, comprehensive report on their Medicaid financing methods and the amounts of the non-federal share of Medicaid spending derived from specific providers. The report should include:

• a description of the methods used to finance the non-federal share of Medicaid payments, including the parameters of any health care-related taxes;
• a state-level summary of the amounts of Medicaid spending derived from each source of non-federal share, including state general funds, health care-related taxes, intergovernmental transfers, and certified public expenditures; and
• a provider-level database of the costs of financing the non-federal share of Medicaid spending, including administrative fees and other costs that are not used to finance payments to the provider contributing the non-federal share.

This report should be made publicly available in a format that enables analysis.

Recommendation 1.2

In order to provide complete and consistent information on the financing of Medicaid and the State Children’s Health Insurance Program (CHIP), Congress should amend Section 2107(e) of the Social Security Act (the Act) to apply the Medicaid financing transparency requirements of Section 1903(d)(6) of the Act to CHIP.

While the Commission voted to approve these recommendations, a common commissioner concern was the increase in administrative burden that could come with the recommendations. Other commissioners brought up the use of databases and if they have been linked to the information used to determine payment, access to payment, and quality and allowed non-governmental researchers to access the internal data systems.

 Multiple commissioners highlighted the example in Texas, a state that has begun collecting provider-level financing amounts. Texas made public the data that can be linked to other available payment information and found successful reporting required an investment of administrative funds. Commissioners used this example to comment on the necessary funds and administrative costs these recommendations will have if they are used.

The final formal recommendation and chapter will be included in the June 2024 Report to Congress.

COMMISSIONS REVIEWS HOSPITAL SUPPLEMENTAL PAYMENT ANALYSES

During the April 2024 meeting, MACPAC staff presented an update on supplemental payment analyses. The presentation highlighted the different types of supplemental data and directed payments and the use of disproportionate share hospital (DSH) and non-DSH supplemental payments by state. Commission staff presented findings from the FY 2022 non-DSH supplemental payment data collected by CMS, depicting variation across states in terms of use of authorities and potential reasons for this variation. This data is new, as states are required to report this data based on the Consolidated Appropriations Act of 2021. Staffers found data on non-DSH supplemental payment amounts to be reliable but said additional data on base payment amounts was unreliable, and that supplemental payment methods tended to be incomplete. Additional analysis of this work is available in MACPAC’s recently released issue brief, Medicaid base and Supplemental Payments to Hospitals[3].

Three policy principles areas for guiding future work were discussed including maintaining or increasing access to services, the potential limitations on supplemental payments due to Medicaid’s emphasis on economy, and how to determine the efficiency of hospital supplemental payments.

Commissioners highlighted importance of understanding variation to provide access to those who need it, specifically noting the importance of including children’s hospitals as well as rural hospitals, due to the high rate of Medicare and Medicaid beneficiaries present in this setting of care. Commissioners voiced that it is hard to measure access while also highlighting the importance of understanding efficiency. Multiple commissioners emphasized the importance of addressing this issue without making providers feel threatened or blamed, and noted it is important to acknowledge that funds will not be taken away, as MACPAC’s research on this topic is exploratory. Many commissioners agreed that the greatest concern is understanding where and why the problem originates from. Lastly, the commissioners voiced that the purpose of finding a solution is so that it can be applied to other services and other access points beyond hospitals.

As next steps, MACPAC staff will continue to review non-DSH supplemental payments to develop a compendium of supplemental payment methods, host a technical expert panel to discuss the potential development of a payment index to assess total base and supplemental payments across states, and update MACPAC’s issue brief on managed care directed payment spending[4].

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This Applied Policy® Summary was prepared by Emma Hammer with support from the Applied Policy team of health policy experts. If you have any questions or need more information, please contact her at ehammer@appliedpolicy.com or at 202-558-5272.

[1] For a detailed description of non-federal funding mechanisms, see this resource from MACPAC.

[2] https://www.medicaid.gov/sites/default/files/2020-01/medicaid-funding-questions.pdf

[3] https://www.macpac.gov/wp-content/uploads/2024/04/Medicaid-Base-and-Supplemental-Payments-to-Hospitals.pdf