On December 8 and 9, 2022, the Medicaid and Children’s Health Insurance Program (CHIP) Payment Advisory Commission (MACPAC) held a virtual public meeting. The meeting included sessions on possible recommendations for improving Medicaid race and ethnicity data collection and reporting, required annual analysis of Disproportionate Share Hospital allotments, recent developments in Section 1115 demonstration waivers and implications for future policy, in-lieu-of services and value-added benefits and implications for managed care rate setting, and Medicaid coverage based on Medicare national coverage determination. The full agenda for the meeting and the presentations for the additional sessions are available here.
Commission Considers Possible Recommendations For Improving Medicaid Race And Ethnicity Data Collection And Reporting
MACPAC staff presented their analysis of state data collection and reporting processes, building on work presented in the October 2022 meeting, and discussed two draft recommendations to improve Medicaid race and ethnicity data. States collect race and ethnicity data through optional questions on Medicaid applications, with factors such as state priorities; Department of Health & Human Services (HHS) and Centers for Medicare & Medicaid Services (CMS) guidance; and whether states use CMS’s single, streamlined model application for health program eligibility influencing the race and ethnicity categories that are included on each states’ application. The variation of this data between states may lead to inconsistencies when states report race and ethnicity data to CMS. To improve the collection and reporting of Medicaid race and ethnicity data and to promote the comparability, completeness and accuracy of the data, MACPAC staff presented two draft recommendations for consideration:
- Proposes that HHS updates the model application to include updated race and ethnicity questions, information on the purpose of these questions, and guidance on how to implement these changes; and
- Proposes the development of training materials for eligibility workers, assisters, and navigators to ensure that applicants are receiving consistent and accurate information about the purpose of the race and ethnicity questions.
Commissioner discussion was focused on ways to refine the recommendations. One commissioner noted that previous research has indicated that a combined race and ethnicity question is a best practice, but the first recommendation does not direct CMS to include a combined question. MACPAC staff emphasized that the Commission will recommend the use of best practices but will not direct CMS to implement particular actions. Another commissioner expressed concern that the challenge with transferring information to CMS is not addressed in the recommendations. MACPAC staff explained that it is the states’ role to coordinate with vendors. Several commissioners emphasized the need to collect disability, sexual orientation, and gender identity data to better understand disparities. While the Commission is starting with race and ethnicity data due to the clear federal standards, future work will include data collection and reporting for disability, sexual orientation, and gender identity data. Commissioners were also interested in whether there are other sources of data, such as data collected by community health centers, that could be useful in future work on data collection and reporting.
Overall, commissioners expressed support for both recommendations and noted that the topic should be a high priority. Chair Melanie Bella emphasized that the collection of data and data transparency is a core priority and that the Commission will continue work on the topic in the coming years. The recommendations will be voted on in the January 2023 meeting and will be a chapter in the March 2023 report.
Commission Discusses Analysis Of Disproportionate Share Hospital Allotments
MACPAC staff presented their statutorily required analysis of disproportionate share hospital (DSH) allotments, including a discussion of the relationship of federal DSH allotments with the number of uninsured individuals, uncompensated care, and hospitals that provide essential community services. While the uninsured rate in 2021 decreased by 0.3 percentage points from 2020, an estimated 15 million Medicaid beneficiaries, including 5.3 million children, could lose coverage when the public health emergency’s continuous coverage requirement ends.
States’ DSH payments can be allocated to individual hospitals up to their costs for uncompensated care. In 2020, $42 billion of charity care and bad debt were reported by hospitals, with non-expansion states reporting double the uncompensated care compared to expansion states. The $42 billion of uncompensated care includes $22 billion of charity care for uninsured individuals and $7 billion of charity care for insured individuals. Medicaid shortfall, the difference between the cost of care for Medicaid beneficiaries and payments for those services, was estimated to be $25 billion in 2020. MACPAC staff identified 749 hospitals that met the DSH criteria for providing essential health services in 2018, a definition that MACPAC bases off of services suggested in statute. DSH allotments are planned to be reduced by $8 billion each year in 2024-2027, with the reductions impacting states differently. However, reductions have been delayed several times.
Commissioner discussion was focused on providing comments on the report and direction for future analysis. One commissioner questioned whether the undercount in Medicaid uninsured data impacts the DSH allotment analysis, requesting further analysis on this topic. MACPAC staff explained that their analysis uses the census data and if the uninsured rate is significantly undercounted, DSH allotment reductions could be impacted. Another commissioner expressed concern about how to accurately account for the targeting of DSH payments and suggested that MACPAC considers this issue in next year’s report. MACPAC staff agreed that the lack of hospital level data on provider-based financing is a challenge but noted that previous analysis suggested that states that rely on intergovernmental transfers to fund DSH payments largely target DSH to publicly owned providers. Chair Melanie Bella emphasized that the total package of payments should be analyzed, with MACPAC staff noting additional analysis could use data on directed payment preprints and 2019 DSH audits, but that data on provider contributions is still largely unavailable.
MACPAC’s analysis of DSH allotments will be published in the March 2023 report and staff will continue to monitor Congressional action on DSH. The next report cycle (March 2024) will include the last statutorily required report for DSH allotments. Additionally, MACPAC staff will present recommendations on a countercyclical adjustment to DSH allotments in a future meeting.
MACPAC Discusses Recent Developments In Section 1115 Demonstration Waivers And Implications For Future Policy
Under Section 1115 of the Social Security Act, the Department of Health & Human Services (HHS) has the authority to waive federal Medicaid requirements for demonstration projects likely to promote Medicaid objectives. Waivers must meet several requirements, including remaining budget neutral, providing for public input, and periodic reporting and evaluation. Nearly every state has at least one Section 1115 waiver, with many having multiple waivers.
In 2022, CMS approved seven comprehensive demonstrations, with more applications pending. Several recently approved waivers will allow states to test approaches that address social determinants of health (SDOH) and health-related social needs (HRSN), such as housing-related interventions. Additional recent waivers allow states to use designated state health program (DSHP) funding to support state funding of specific initiatives and provide continuous eligibility for Medicaid and CHIP. CMS has also required states to increase Medicaid provider payment rates for primary care, behavioral health, and obstetrics care to maintain payment adequacy.
Commissioner discussion focused on areas for future analysis. Some commissioners were interested in additional clarification on payment adequacy and whether CMS is adjusting budget neutrality to address increases in nursing home staffing requirements. More broadly, commissioners requested continued examination of how CMS continues to use its waiver authority for SDOH services and called for more consumer voice in the development of projects. MACPAC will collect and review monitoring and evaluation reports to further examine state activities and findings and identify opportunities for future Commission discussion.
Commission Discusses In-Lieu-Of Services And Value-Added Benefits And Their Implications For Managed Care Rate Setting
During the September and October MACPAC public meetings on the managed care rate setting process, the Commission identified in-lieu of services (ILOS) as a priority area for further discussion. ILOS flexibility allows states to cover medically appropriate, cost-effective substitutes of state plan services. CMS is expected to release proposed regulations addressing ILOS and other managed care topics in 2023. In this session, MACPAC staff presented an overview on how ILOS and value-added benefits (VABs) are treated in rate setting and suggested potential areas the Commission could consider in a future comment letter.
State and health plans can offer VABs in addition to covered Medicaid state plan services. VABs typically cover non-medical benefits and have been increasingly used by plans to offer services addressing social determinants of health (SDOH). Additionally, Section 1115 waiver authority is increasingly allowing states to pursue ILOS and other SDOH-related services. MACPAC staff noted that there is limited guidance on how ILOS and state flexibility can be included into rates and applied under actuarial soundness requirements, which can create challenges for state population health efforts.
Commissioners discussed areas that could be further clarified. One commissioner was particularly interested in the financial aspects of ILOS, including capitation rates, financial reporting, and payment adequacy. Other commissioners requested information on how value-based care and health-related social needs (HRSNs) could be included in reporting, and whether there is benefit to including HRSNs in the Medical Loss Ratio or rates. One commissioner stressed the importance of capturing real-time data as ILOS occurs, rather than performing a look-back. Several commissioners were interested in examining learnings from states using Section 1115 waivers to pursue ILOS and other social determinants of health-related projects, such as California. The Commission will continue work on ILOS in future meetings, and Commissioner feedback will be considered in a future comment letter.
Medicaid Coverage Based On Medicare National Coverage Determination
Following discussion in MACPAC’s September 2022 meeting, MACPAC staff discussed background on the different drug coverage standards under Medicaid and Medicare Part B and presented a policy option that would allow states to implement coverage requirements following a Medicare national coverage determination (NCD). Under the Medicaid Drug Rebate Program, an optional benefit provided by all states, states must cover all outpatient prescription drugs from participating manufacturers, which may include physician-administered drugs, as soon as they receive FDA approval and enter the market. While Medicare Part B must cover items and services that are reasonable and necessary, CMS can develop additional coverage requirements through the NCD process, including coverage with evidence development (CED). CED links coverage to participation in a clinical study or collection of clinical data and was used in Medicare’s coverage decision for Aduhelm, a treatment for Alzheimer’s disease. The draft recommendation proposes an amendment to the Social Security Act to allow states to exclude or restrict coverage of an outpatient drug based on a Medicare NCD, including any CED requirements. A statutory change would give states the flexibility to align their coverage criteria with a federal determination of reasonable and necessary coverage, which is unlikely to affect many drugs and could alleviate budget pressure.
Discussion focused on whether the Commission will move forward with the recommendation for vote at the January 2023 meeting. One commissioner expressed concern that the recommendation is limited in scope and does not fully address the issue of drug spending within the Medicaid program. The commissioner noted the differences in the Medicaid and Medicare populations, the historical exclusion of low-income patients from clinical trials, and the reliance of the recommendation on a statutory change that is not Medicaid-specific. Another commissioner emphasized that the historical use of CED could provide protective benefits for patients if a state chooses to adopt the policy. Several commissioners raised the question of whether the recommendation would allow other plans to align their coverage with Medicare NCDs, even if the state did not adopt the policy. MACPAC staff clarified that this could be the case, depending on the way that a state has set up their Medicaid program, to which Commissioners agreed that the recommendation’s language should be changed to restrict the statutory change to only apply to states. Another commissioner raised the question of whether the recommendation applies to CED, a subset of NCDs, or NCDs more broadly. As the recommendation refers to the broad category of NCDs, MACPAC staff will gather more data to define the scope of NCDs. Several commissioners expressed interest in limiting the scope of the recommendation to CED.
Overall, most commissioners were supportive of the recommendations because of the optional nature of the statutory change and the ability to align Medicaid drug coverage decision making with the expert-level NCD decision. Based on commissioner feedback, MACPAC staff will prepare a final recommendation for a Commission vote at the January 2023 meeting.
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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