New Medicaid Rules: Attacking the Safety Net

Under new CMS rules, low income individuals will probably have as much help in the US as the mentally ill; that is to say nothing.

There are seven new regulations being floated at CMS attracting a lot of attention and push-back. The net effect of each of these regulations is to reduce the federal health care budget. The two proposed regs that caught my eye were the one altering the byzantine rules of matching state Medicaid funds and the one redefining health profession shortage areas (HPSA).

The first reg is one I do not completely understand, but appears to limit some safety net hospital ability to qualify for higher reimbursement due to their critical access (or some other status) that allows them to charge cost-plus.

The regulatory territory at issue is already a bloody battleground. The Government Accountability Office repeatedly exposed state plans that essentially reused federal dollars to pad their own contribution to the Medicaid burden. Enhanced payments were made to public hospitals under the upper payment limit, which allows states to pay some providers higher rates than others as long as the aggregate doesn’t exceed what Medicare would pay. A portion of the enhanced payments would then be returned to the state through intergovernmental transfers, contributing to the local contribution for a new federal match.

The second rule refers to something I am much more intimately familiar with, since it relates to the trajectory of my career; I have only ever worked in areas with some sort of shortage designation since I came to the US. A shortage area should bring rural areas to mind first, sparsely populated places where there is a real difficulty attracting and retaining physicians. You may be surprised that HPSA's exist in many urban areas as well, such as inner city Atlanta and just outside the beltway in the very urban Langley Park area (technically an MUP, for those to whom it matters). There are simply more under-served individuals in inner cities and urban areas than there are in sparsely populated places.

The new rules will sharply change the weights of factors going into a HPSA calculation, increasing the importance of population-to-provider ratios to the point that nearly any populated areas will lose their top HPSA status. The rule also proposes three levels of FQHC based on the HPSA score. Only 25% of the country's safety net will retain its top level status. CMS counters saying that only 1.6% of health centers would lose their designation entirely. Since achieving one of the two new designations has unclear implications for future funding, there is reason for FQHC's to be anxious. Meanwhile both sides are lobbying with their best argument, neither of which relates directly to the other.

This government's unblushing ability to distort reality comes across in a press release stating that the new rules increase state's flexibility in designing their own Medicaid systems. I guess if you get less money from the feds, you are proportionately less accountable. I'm sure that will come as a comfort to those safety net and community hospitals that will close due to a lack of funding.