Hospitals don't want to help fund DSH cut delays

Hospitals face a potentially Catch-22 fight over a key lobbying priority — $4 billion in Medicaid disproportionate-share hospital cuts slated to start Oct. 1.

Lawmakers appear poised to follow through with another delay. But the Senate Finance Committee is also eying simultaneous cuts to other hospital funding streams because, for the first time since DSH cut delays started, Congress now has to find a way to pay for them. This is due to a change to the way Congressional Budget Office scores the delays.

One hospital lobbyist who spoke on condition of anonymity said committee staff told him that at least half of the money to fund the cuts need to come from hospitals.

"We do not accept that," he said. "We are not supportive of that."

The lobbyist argued that since hospitals have already taken significant hits recently from HHS, Congress should look elsewhere. He cited the Trump administration's recent pressure on 340B hospitals, which saw Medicare Part B reimbursement cuts, and the recent "site-neutral" payment regulation. That policy, meant to even out Medicare payments to physicians' offices and hospitals for the same services, went into effect this year.

Hospitals have sued the Trump administration over both policies, and the claims are currently winding their way through federal courts.

"The mindset that hospitals should be cut by the DSH delay because it's our turn — we will push back against that," the lobbyist said. "We've been cut, and that has caused significant pain on the part of our hospitals. That's a lot of damage."

It could also prove politically complicated to make broader hospital cuts for the sake of DSH since the DSH program itself heavily favors some states over others.

This is because Congress hasn't changed the funding formula since 1992, when lawmakers capped the allotments each state received at that time.

For example, Wyoming now receives the lowest Medicaid, about $3.72 per uninsured patient according to data from congressional Medicaid advisors. In stark contrast, Massachusetts gets $1,576 per uninsured patient. The District of Columbia receives more than $2,000 per uninsured patient while Utah gets about $60.

Consequently, some states would see only a small funding reduction compared to others. For most states, the cuts are roughly 1% of their total Medicaid spending, according to data from the Medicaid and CHIP Payment and Access Commission (MACPAC).

The inequity prompted Sen. Marco Rubio (R-Fla.) to propose an overhaul to the DSH funding formula in a discussion draft he released late last year.

Florida receives one of the lowest allotments and he suggested basing the payments on a state's share of Americans below the federal poverty level.

But Senate Finance Committee Chair Chuck Grassley (R-Iowa) signaled last week an overhaul won't happen — at least not this time around. He said Congress is much more likely to pass another delay.

"I think it would be more realistic to talk about if (the cuts) are going to be continued or not be continued, and I think they're going to be continued," he told Modern Healthcare.

The senator also said the delays are likely to get wrapped into a package with the other so-called Medicaid extenders. The current delays expire at the same time as other key Medicaid funding, including the block grants to U.S. territories and popular programs like the "Money Follows the Person" demonstration.

One Senate aide close to the discussion said there's a big worry that if lawmakers try to reform the DSH formula this year, things could go sideways very quickly due to the politics in play. Congress could fall into gridlock, and the cuts could go into effect.

Hospitals do have a potential boon in the fact that this extender package will likely coincide in timing with Congress' upcoming legislation to raise the federal debt limit.

While the Treasury is barreling toward the imminent end of current borrowing limits, Treasury Secretary Steve Mnuchin on March 5 outlined for Congress a list of "extraordinary measures" the administration has planned in order to stall the deadline.

This pushes the need for a debt limit package into late summer or early fall — or, as one staffer noted, around the time the Medicaid extenders need to pass.

Earlier this year, the Medicaid and CHIP Payment and Access Commission which advises Congress on Medicaid suggested that lawmakers should implement the cuts, but phase them in more slowly.

The advisors, like Rubio in his draft proposal, suggested that the states with the highest share of the nation's poor should receive the smallest cuts.

Hospitals, meanwhile, are looking for a two-year delay.

"We believe a two year delay is an appropriate amount of time," said Tom Nickels, executive vice president of the American Hospital Association.