CMS Medicaid access rule poses financial hit to hospitals
A CMS proposal allowing states to cut Medicaid rates without oversight could put hospitals and medical practices at risk for soaring uncompensated-care costs and facility closures, providers told the agency.
The CMS in March suggested that states cutting Medicaid rates by up to 4% in one year or up to 6% in two consecutive years would not need to conduct an analysis to determine if the cuts harm access to care. Comments on the proposal were due Tuesday.
The change could especially hurt rural hospitals that serve a high percentage of Medicaid patients, according to Casey Dungan, senior vice president at the Tennessee Hospital Association. Those hospitals cannot afford to exit the managed-care networks and have no leverage to negotiate rates that would cover the cost of providing care to Medicaid patients.
Medicaid rates are already lower than commercial and Medicare rates and continuous cuts without oversight wouldn't be sustainable, Dungan said.
"Where the gap is growing larger, this would indicate that providers who have a greater percentage of Medicaid patients than the state's average Medicaid percent are likely experiencing significant financial hardship which can lead to hospital closures in underserved areas," Dungan said in a May 18 comment letter.
The Virginia Hospital & Healthcare Association warned that even if hospitals could survive the cuts, the breadth of services they offer could shrink. Some have already stopped offering obstetric services due to current rates. More cuts would result if reductions continue unchecked, James Andrews, vice president of financial policy at the association, said in a comment.
A 6% reduction to Medicaid reimbursement over two years could mean a $94 million decrease for Virginia hospitals.
The proposal also doesn't account for thin Medicaid patient margins for primary-care physicians. A primary-care physician's profit margin is usually less than 4% a year, which means they are just getting by. Even modest cuts would wipe those margins out, putting access to care at risk, according to Dr. John Meigs, board chair at the American Academy of Family Physicians.
The CMS claimed the proposed rule would reduce states' administrative burden, saying rate reductions under 4% are "nominal and unlikely to diminish access to care."
The proposed rule also would exempt some states from an Obama-era rule that required them to assess how easy it is for fee-for-service Medicaid beneficiaries to receive primary care; pre- and post-natal obstetric services; and specialty and behavioral healthcare. If the majority of a state's Medicaid population received services through managed-care plans, they would not have to comply with this assessment.
But fee-for-service populations are the most vulnerable Medicaid patients and their care would be affected the most by the change, according to Penny Thompson, chair of the Medicaid and CHIP Payment and Access Commission. The panel advises the CMS and Congress on Medicaid matters.
Individuals with disabilities or who need long-term support and services are more likely to be fee-for-service Medicaid beneficiaries.
If the changes are finalized, states with an overall Medicaid managed-care penetration rate of 85% or greater would be exempt from most access monitoring requirements. The CMS estimates that 17 states including Arizona, the District of Columbia, Florida, Kansas and Kentucky fall into that category.
In total, the proposed changes would cut administrative burden for all states by 561 hours with a total savings of over $1.6 million.
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