Hospital donations put N.H. Medicaid expansion in jeopardy

New Hampshire's Medicaid expansion may end next year, because of the state's use of voluntary donations from hospitals to fund the program.

State lawmakers approved creating a fund in 2015 to pay for Medicaid expansion after federal funding started to drop in 2016. The fund is partially furnished by voluntary donations from hospitals.

But that violates federal law, the CMS told New Hampshire Gov. Chris Sununu in a letter released Friday. The agency said the donations represent a quid pro quo between providers and the state where the donations would be returned to hospitals via Medicaid revenue.

"CMS believes there is a relationship between the donations and Medicaid payments because Medicaid expansion is conditioned on the receipt of donations as articulated in New Hampshire legislation," the agency said in the letter.

The CMS is giving the state until the end of fiscal 2018 to fix the supplemental fund or else it will lose federal funding.

All states except Alaska rely on provider taxes and fees to provide a portion of the non-federal share of the costs of Medicaid, according to the Kaiser Family Foundation. Seven of the expansion states-Arkansas, Arizona, Colorado, Illinois, Indiana, Louisiana and Ohio-all reported plans to use new or increased provider taxes or fees to fund all or part of the state costs of the ACA Medicaid expansion beginning in January 2017.

But the CMS says those taxes are different than provider donations.

A provider tax is placed on all providers in a particular class and must be broad-based, uniformly imposed, according to Billy Millwee, a health policy consultant at Sellers Dorsey and former Medicaid director for Texas.

"The state in imposing the tax can't guarantee that a provider will receive back in Medicaid reimbursements an amount equivalent or greater than the tax that was paid," Millwee said. "It looks like CMS is asserting that the donations (in New Hampshire) don't comply with the requirement because the donations are made based on a quid-pro quo agreement with the expectation of a financial return equivalent to or exceeding the amount donated."

As of Aug. 1, 52,000 New Hampshire residents are covered through the expanded Medicaid program, according to state data. The state now receives more than $300 million in federal funding for new adults, which accounts for 31% of all federal Medicaid funding for New Hampshire.

Sununu said he became aware in June that the CMS had been scrutinizing the non-federal share financing for the state's expansion since 2016. If the CMS terminates the program's federal funding, the state will end its expansion, according to the law.

For now, Medicaid beneficiaries won't see a change in their access to coverage through the end of 2018 while the state works to rectify the issue, Sununu said.

"It would have been grossly unfair to strip medical coverage from the thousands of Granite Staters who rely on the program without a sufficient alternative in place," Sununu said. "This transition period will allow New Hampshire's leaders enough time to carefully consider and deliberate the future of Medicaid expansion given this new guidance from CMS."