After Effort from Klobuchar, Franken, Peterson, McCollum, Ellison, and Nolan, the Centers for Medicare and Medicaid Services Withdraw Proposal That Would Have Resulted in $40 Million Cut to Minnesota Hospitals

Aug 5, 2016 Issues: Health

The Centers for Medicare and Medicaid Services (CMS) had included a proposal in the fiscal year 2017 Medicare Inpatient Prospective Payment System (IPPS) proposed rule that would have substantially altered the distribution of Medicare payments under the Disproportionate Share Hospital program, significantly harming Minnesota’s safety net hospitals and the patients they serve

Last month, Minnesota lawmakers sent a letter to Acting Administrator Slavitt urging the CMS to withdraw this proposal before issuing the IPPS rule and to revise the formula to more accurately reflect the care provided; This week, CMS announced that it has withdrawn the proposal before issuing the IPPS final rule and that it will revise the formula to more accurately reflect the care provided

WASHINGTON, DC – Following an effort from Senators Amy Klobuchar and Al Franken, along with Representatives Collin Peterson, Betty McCollum, Keith Ellison, and Rick Nolan, the Centers for Medicare and Medicaid Services (CMS) has announced that it has withdrawn a proposal that would have resulted in $40 million cut to Minnesota hospitals. The CMS had included a proposal in the fiscal year 2017 Medicare Inpatient Prospective Payment System (IPPS) proposed rule that would have substantially altered the distribution of Medicare payments under the Disproportionate Share Hospital program, significantly harming Minnesota’s safety net hospitals and the patients they serve. Last month, Minnesota lawmakers sent a letter to Acting Administrator Slavitt urging the CMS to withdraw this proposal before issuing the IPPS rule and to revise the formula to more accurately reflect the care provided. This week, CMS announced that it has withdrawn the proposal before issuing the IPPS final rule and that it will revise the formula to more accurately reflect the care provided.

“Expanding Medicaid in Minnesota has resulted in fewer uninsured patients, and we should not be punished for it. This proposal would have inflicted undue harm to our state’s hospitals and most vulnerable patients,” said Klobuchar. “I am encouraged to see that the Centers for Medicare and Medicaid Services has withdrawn this proposal until the payment formula can be revised to more accurately reflect the care these hospitals provide.”

“Minnesota hospitals are among the best in the nation, providing high-quality care to all Minnesotans, including those who are uninsured and underinsured,” said Franken. “That’s why when the Centers for Medicare and Medicaid Services released a proposal that would have resulted in steep, detrimental cuts to our hospital system, we called on the agency to reconsider its plan. I’m glad to see that the agency has listened to us and decided to withdraw and revise its proposal—this is good news for our hospitals, for the patients they serve, and for Minnesota.” 

“Safety-net hospitals provide much needed primary care to uninsured and underinsured Minnesotans,” said Peterson. “Though Minnesota has one of the lowest uninsured rates in the nation, it is important that we protect DSH funding so these facilities can continue to serve the state’s most vulnerable populations.”

“The Centers for Medicare and Medicaid Services has done the right thing by withdrawing this proposal and preventing a damaging cut to Minnesota’s hospitals,” said McCollum. “As more Minnesotans receive health care through the Affordable Care Act, it is important that funding formulas reflect that success and don’t needlessly punish hospitals and their patients.”

"Minnesota has one of the lowest uninsured rates in the country, and expanding Medicaid is a big part of the reason why,” said Ellison. “I applaud CMS' decision to withdraw this proposal. We should be fighting to get the last few uninsured Minnesotans covered - not slashing the funds that already cover so many."

“I am pleased that this proposal has rightfully been withdrawn,” said Nolan. “Cutting funding would have been a serious blow to workers and Minnesota's most vulnerable families in need of quality medical care. We will continue to work with CMS to ensure a fair and accurate process moving forward.”

“The proposed Medicare DSH formula would have penalized Minnesota as well as other states that have done the right thing by expanding health insurance coverage for low-income residents,” said Lawrence Massa, president & CEO of the Minnesota Hospital Association. “We appreciate the work of our state congressional delegation and state legislative leaders who raised concerns that $40 million a year in Medicare funds would have been shifted from Minnesota to states that have not been as successful in reducing the number of uninsured patients. DSH has provided some relief for hospitals serving uninsured and underinsured patients.”

The full text of the letter from Klobuchar, Franken, Peterson, McCollum, Ellison, and Nolan to CMS Acting Administrator Slavitt is below.

Dear Acting Administrator Slavitt:

We are writing to express concern with a proposal in the Centers for Medicare and Medicaid Services' (CMS) fiscal year (FY) 2017 Medicare Inpatient Prospective Payment  System (IPPS) proposed rule that would substantially alter the distribution of Medicare payments under the Disproportionate Share Hospital (DSH) program. This proposed change would significantly harm Minnesota's safety net hospitals and the patients they serve. We urge CMS to withdraw this proposal before issuing the TPPS final rule and revise the formula to more accurately reflect the care provided.

As you know, the Patient Protection and Affordable Care Act (ACA) (P.L. 1 1 1-148) included changes to the DSH payment formula due to the expectation that the law's Medicaid expansion provision would reduce hospital uncompensated care (UC) costs. Under the new formula, hospitals receive 25 percent of the DSH funds they would have received under the pre-A CA formula. The remaining 75 percent goes to a nationwide UC pool with hospital s receiving a portion of those funds based on the total amount of UC provided. CMS currently uses "low­income days" to calculate hospitals' UC payments, which includes inpatient care provided to Medicaid beneficiaries and Medicare supplemental security income beneficiaries.

Starting in FY 2018 CMS is proposing to switch from the low-income days methodology to using data on hospitals' charity care and bad debt as reported on S-10 worksheet of the Medicare cost report. We have heard strong concerns from Minnesota hospitals that the S- 10 worksheet lacks accuracy, consistency, completeness and is not subject to audits, leaving the data

vulnerable to fraud and abuse. Furthermore, we believe only using levels of charity care and bad debt to determine UC costs is too narrow of a definition. CMS should broaden the UC definition to also include the unreimbursed costs of Medicaid, State Children's Health Insurance Program, and other state and local care programs.

The harmful change CMS is proposing would punish states like Minnesota that expanded Medicaid because those states have lower levels of charity care and bad debt. At the same time, this proposal would reward states that have failed to reduce the uninsured rate and would remove an important incentive for these states to expand Medicaid in the future.

We are proud that Minnesota has one of the lowest uninsured rates in the nation. The state should not be penalized for its efforts to increase health insurance coverage and access to care. We urge CMS to withdraw and revise the current proposal to redistribute DSH payments. Thank you for your attention to this important issue and we look forward to your response.