Medicaid
CMS Needs More Information on the Billions of Dollars Spent on Supplemental Payments Gao ID: GAO-08-614 May 30, 2008The financing of the $299 billion Medicaid program is shared between the federal government and states. States pay qualified providers for covered Medicaid services and receive federal matching funds from the Department of Health & Human Services' (HHS) Centers for Medicare & Medicaid Services (CMS) for expenditures authorized in their state Medicaid plans. In addition to these standard Medicaid payments, most states make supplemental payments to certain providers, which are also matched by federal funds. GAO was asked for information about Medicaid supplemental payments. GAO examined (1) what information states report about supplemental payments on Medicaid expenditure reports and (2) in selected states, how much was distributed as supplemental payments, to what types of providers, and for what purposes. GAO analyzed CMS's Medicaid expenditure reports and surveyed five states that make large supplemental payments.
CMS Medicaid expenditure reports show that states made at least $23 billion in supplemental payments in fiscal year 2006, with the federal share of these payments totaling over $13 billion. States made $17.1 billion in payments through Disproportionate Share Hospital (DSH) programs, which under federal law provide additional reimbursement, up to a cap, to hospitals that serve large numbers of low-income individuals. In addition, states made at least $6.3 billion in non-DSH supplemental payments, including payments through Upper Payment Limit (UPL) programs, under which states make payments to providers up to the upper limit for obtaining federal matching funds. However, information on non-DSH supplemental payments was incomplete. The exact amount and distribution of fiscal year 2006 non-DSH payments to states are unknown because states did not report all their payments to CMS. CMS officials said that they were updating reporting requirements to collect better information on supplemental payments, including finalizing a rule proposed in 2005 responding to federal law that required states to report more detailed information on DSH payments and seeking improved UPL payment information. As of April 2008, specific implementation dates for these actions were not known. CMS's plans did not include a requirement that states report all UPL payments on a facility-specific basis, as GAO recommended in 2004 (See Medicaid: Improved Federal Oversight of State Financing Schemes Is Needed, GAO-04-228). GAO believes this 2004 recommendation remains valid. The five states GAO surveyed--California, Massachusetts, Michigan, New York, and Texas--reported making $12.3 billion in Medicaid supplemental payments in federal fiscal year 2006 through programs with broadly stated purposes, with half of these payments made to local government hospitals. Collectively, the five states reported making payments through 48 supplemental payment programs, with each state operating from 3 to 15 different programs that paid hospitals, nursing facilities, or other providers. The five states reported purposes for their programs that often focused on various categories of eligible providers serving individuals on Medicaid, with low incomes, or without insurance. The state Medicaid plan sections establishing the states' supplemental payments did not always clearly identify how the payments would be calculated. CMS officials said that as part of an oversight initiative started in 2003, CMS ensures that state plans demonstrate a link between the distribution of supplemental payments and Medicaid purposes. However, not all state supplemental payment programs have been reviewed under CMS's initiative. In each of the five states, supplemental payments were concentrated on a small proportion of providers: the 5 percent of providers receiving the largest amount of supplemental payments in individual states received from 53 percent to 71 percent of all supplemental payments. Some providers received substantial payments from more than one supplemental payment program.
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Director: Team: Phone:GAO-08-614, Medicaid: CMS Needs More Information on the Billions of Dollars Spent on Supplemental Payments
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Report to the Ranking Member, Committee on Finance, U.S. Senate:
United States Government Accountability Office:
GAO:
May 2008:
Medicaid:
CMS Needs More Information on the Billions of Dollars Spent on
Supplemental Payments:
GAO-08-614:
GAO Highlights:
Highlights of GAO-08-614, a report to the Ranking Member, Committee on
Finance, U.S. Senate.
Why GAO Did This Study:
The financing of the $299 billion Medicaid program is shared between
the federal government and states. States pay qualified providers for
covered Medicaid services and receive federal matching funds from the
Department of Health & Human Services‘ (HHS) Centers for Medicare &
Medicaid Services (CMS) for expenditures authorized in their state
Medicaid plans. In addition to these standard Medicaid payments, most
states make supplemental payments to certain providers, which are also
matched by federal funds. GAO was asked for information about Medicaid
supplemental payments. GAO examined (1) what information states report
about supplemental payments on Medicaid expenditure reports and (2) in
selected states, how much was distributed as supplemental payments, to
what types of providers, and for what purposes. GAO analyzed CMS‘s
Medicaid expenditure reports and surveyed five states that make large
supplemental payments.
What GAO Found:
CMS Medicaid expenditure reports show that states made at least $23
billion in supplemental payments in fiscal year 2006, with the federal
share of these payments totaling over $13 billion. States made $17.1
billion in payments through Disproportionate Share Hospital (DSH)
programs, which under federal law provide additional reimbursement, up
to a cap, to hospitals that serve large numbers of low-income
individuals. In addition, states made at least $6.3 billion in non-DSH
supplemental payments, including payments through Upper Payment Limit
(UPL) programs, under which states make payments to providers up to the
upper limit for obtaining federal matching funds. However, information
on non-DSH supplemental payments was incomplete. The exact amount and
distribution of fiscal year 2006 non-DSH payments to states are unknown
because states did not report all their payments to CMS. CMS officials
said that they were updating reporting requirements to collect better
information on supplemental payments, including finalizing a rule
proposed in 2005 responding to federal law that required states to
report more detailed information on DSH payments and seeking improved
UPL payment information. As of April 2008, specific implementation
dates for these actions were not known. CMS‘s plans did not include a
requirement that states report all UPL payments on a facility-specific
basis, as GAO recommended in 2004 (See Medicaid: Improved Federal
Oversight of State Financing Schemes Is Needed, GAO-04-228). GAO
believes this 2004 recommendation remains valid.
The five states GAO surveyed”California, Massachusetts, Michigan, New
York, and Texas”reported making $12.3 billion in Medicaid supplemental
payments in federal fiscal year 2006 through programs with broadly
stated purposes, with half of these payments made to local government
hospitals. Collectively, the five states reported making payments
through 48 supplemental payment programs, with each state operating
from 3 to 15 different programs that paid hospitals, nursing
facilities, or other providers. The five states reported purposes for
their programs that often focused on various categories of eligible
providers serving individuals on Medicaid, with low incomes, or without
insurance. The state Medicaid plan sections establishing the states‘
supplemental payments did not always clearly identify how the payments
would be calculated. CMS officials said that as part of an oversight
initiative started in 2003, CMS ensures that state plans demonstrate a
link between the distribution of supplemental payments and Medicaid
purposes. However, not all state supplemental payment programs have
been reviewed under CMS‘s initiative. In each of the five states,
supplemental payments were concentrated on a small proportion of
providers: the 5 percent of providers receiving the largest amount of
supplemental payments in individual states received from 53 percent to
71 percent of all supplemental payments. Some providers received
substantial payments from more than one supplemental payment program.
What GAO Recommends:
GAO recommends that the Administrator of CMS (1) expedite issuance of
the final rule implementing additional DSH reporting requirements and
(2) develop a strategy to identify all of the supplemental payment
programs established in states‘ Medicaid plans and review those
programs that have not been subject to review under CMS‘s 2003
initiative. CMS generally agreed with these recommendations.
To view the full product, including the scope and methodology, click on
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-614]. For more
information, contact James C. Cosgrove at (202) 512-7114 or
cosgrovej@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
CMS Reports Show $23 Billion Spent on Medicaid DSH and Non-DSH
Supplemental Payments in Fiscal Year 2006, but This Amount Is Likely
Understated as Information on Non-DSH Payments Is Incomplete:
Five Surveyed States Reported Distributing $12.3 Billion in
Supplemental Payments in Fiscal Year 2006 for Broadly Stated Purposes,
Often to Local Government Hospitals:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: Information on Medicaid Supplemental Payments in the
States and the District of Columbia, as Reported by States:
Appendix III: Summary of Medicaid Supplemental Payment Programs in Five
Surveyed States:
Appendix IV: Distribution of Medicaid Supplemental Payments, by
Provider Type and Ownership, in Five Surveyed States:
Appendix V: Extent That Supplemental Payments Were Concentrated and
Providers Received Multiple Payments:
Appendix VI: Comments from the Department of Health & Human Services:
Appendix VII: GAO Contact and Staff Acknowledgments:
Related GAO Products:
Tables:
Table 1: Medicaid Arrangements Using Supplemental Payments to
Inappropriately Generate Federal Payments and Federal Actions to
Address Them, 1987 through 2002:
Table 2: Number of Medicaid DSH and Non-DSH Supplemental Payment
Programs, Number of Providers Receiving Payments, and Total Payment
Amounts Made in Fiscal Year 2006, as Reported by the Five Surveyed
States in January 2008:
Table 3: California's Supplemental Payment Programs and Numbers of
Providers Receiving Payments in Fiscal Year 2006, as Reported by the
State in January 2008:
Table 4: Supplemental Payments Made in Fiscal Year 2006, Grouped by
Provider Type and Category of Ownership and Ranked by Total Payment
Amount, as Reported by the Five Surveyed States in January 2008:
Table 5: State DSH Payments Made in Fiscal Year 2006 as a Percentage of
Total State Medicaid Payments and Total National DSH Payments, by
State:
Table 6: State Non-DSH Payments Made in Fiscal Year 2006 as a
Percentage of Total State Medicaid Payments, Ranked Alphabetically by
State:
Table 7: California Supplemental Payment Programs from Which Payments
Were Made in Fiscal Year 2006, as Reported to GAO by the State in
January 2008:
Table 8: Massachusetts Supplemental Payment Programs from Which
Payments Were Made in Fiscal Year 2006, as Reported to GAO by the State
in January 2008:
Table 9: Michigan Supplemental Payment Programs from Which Payments
Were Made in Fiscal Year 2006, as Reported to GAO by the State in
January 2008:
Table 10: New York Supplemental Payment Programs from Which Payments
Were Made in Fiscal Year 2006, as Reported to GAO by the State in
January 2008:
Table 11: Texas Supplemental Payment Programs from Which Payments were
Made in Fiscal Year 2006, as Reported to GAO by the State in January
2008.
Table 12: Supplemental Payments Made in Fiscal Year 2006 by Provider
Type in Five States, as Reported to GAO by the States in January 2008:
Table 13: Supplemental Payments Made in Fiscal Year 2006 by Provider
Ownership Category in Five States as Reported to GAO by the States in
January 2008:
Table 14: Concentration of Supplemental Payments to Top 5 and Remaining
95 Percent of Providers Receiving Payments in Fiscal Year 2006 in Five
States, as Reported to GAO by the States in January 2008:
Table 15: Number of Providers Receiving Payments from Multiple
Supplemental Payment Programs in Five States for Fiscal Year 2006, as
Reported to GAO by the States in January 2008:
Figures:
Figure 1: State DSH Supplemental Payments in Fiscal Year 2006:
Figure 2: State DSH Supplemental Payments as a Percentage of States'
Medicaid Payments in Fiscal Year 2006:
Figure 3: Proportion of Total DSH Payments Made by States, by Category
of Service:
Figure 4: Distribution of Non-DSH Payments Reported by 28 States on CMS
Expenditure Reports in Fiscal Year 2006, by Category of Service and by
Category of Provider:
Figure 5: Distribution of Supplemental Payments Made in Fiscal Year
2006 across Different Types of Providers, as Reported by the Five
Surveyed States in January 2008:
Figure 6: Distribution of Supplemental Payments Made in Fiscal Year
2006 by Provider Ownership Category, as Reported by the Five Surveyed
States in January 2008:
Figure 7: Proportion of Fiscal Year 2006 Supplemental Payments Made to
Top 5 Percent of Providers, by Payment Type, in Each of the Five
Surveyed States, as Reported by States in January 2008:
Abbreviations:
CMS: Centers for Medicare & Medicaid Services:
DSH: Disproportionate Share Hospital:
FMR: Financial Management Report:
HCFA: Health Care Financing Administration:
HHS: U.S. Department of Health & Human Services:
UPL: Upper Payment Limit:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
May 30, 2008:
The Honorable Charles E. Grassley:
Ranking Member:
Committee on Finance:
United States Senate:
Dear Senator Grassley:
Since 2003, Medicaid--the federal and state program that finances
health care for certain low-income individuals--has been on GAO's list
of high-risk programs because of concerns about the program's size,
growth, diversity, and fiscal management.[Footnote 1] One management
challenge stems from the joint federal-state financing of the $299
billion program.[Footnote 2] As pressures on state and federal budgets
have increased, states have sought to maximize the federal funds they
receive through their Medicaid programs, while at the same time the
federal government has sought to control inappropriate Medicaid
spending. Under federal Medicaid law, the federal government reimburses
states for its share of allowable expenditures.[Footnote 3] States pay
qualified health care providers for covered services, then seek
reimbursement for the federal share of the payments.[Footnote 4] In
addition to the standard payments they make for Medicaid services, most
state Medicaid programs make supplemental payments--payments separate
from and in addition to those made at a state's standard Medicaid
payment rates--to certain providers. For years, we and others have
raised concerns regarding states' inappropriate use of supplemental
payment arrangements to leverage billions of dollars in federal
Medicaid matching funds without a commensurate increase in state
Medicaid expenditures. These inappropriate arrangements involved large
supplemental payments to government providers such as state-or county-
owned hospitals or nursing homes. We have made numerous recommendations
since 1994 to improve oversight of these Medicaid payments, including
recommending improved monitoring and reporting of them.[Footnote 5] A
variety of legislative, regulatory, and federal oversight actions have
helped to curb these inappropriate Medicaid supplemental payment
arrangements, including a federal oversight initiative begun in 2003
that closely reviewed states' supplemental payments.[Footnote 6] There
is continued congressional interest in understanding state supplemental
payment programs, including the amount of payments made and the
characteristics of the Medicaid providers receiving the payments.
[Footnote 7]
States have established a variety of programs to administer
supplemental payments; for the purpose of this report, we classify
these programs into two types.[Footnote 8] Under federal law, states
are required to make Disproportionate Share Hospital (DSH) payments to
hospitals that treat large numbers of low-income and Medicaid
patients.[Footnote 9] States' DSH programs are subject to annual caps
on the amount of DSH payments a state may make as well as on the DSH
payments individual hospitals may receive. States also make non-DSH
supplemental payments. For example, over the years, many states have
used the flexibility under Medicaid's Upper Payment Limit (UPL)
provisions--which define the upper limit on payments for which states
can receive federal matching funds--to make supplemental payments.
[Footnote 10] States establish Medicaid provider payment rates, and in
practice, states' standard Medicaid payments are often less than the
UPL. Because of this gap, states have established programs to make
supplemental payments to certain providers above standard Medicaid
payment rates but within the UPL. Unlike DSH payments, UPL payments are
not specifically required to be established under federal law. UPL
payments interact with DSH payments in that any Medicaid payments made
to a hospital count toward the hospital's DSH cap, reducing the total
DSH payments the hospital may receive. In recent years, some states
have also been allowed to make supplemental payments under Medicaid
demonstrations authorized under section 1115 of the Social Security
Act.[Footnote 11] In this report, we use the term non-DSH payments
[Footnote 12] to include both UPL payments and supplemental payments
made under Medicaid demonstrations.
The federal Centers for Medicare & Medicaid Services (CMS), an agency
of the U.S. Department of Health & Human Services (HHS), oversees state
Medicaid programs, including supplemental payment programs, by
approving covered populations, services, and payment methods in each
state's Medicaid plan.[Footnote 13] States receive federal
reimbursement for Medicaid expenditures by submitting quarterly
expenditure reports. In response to your request for information about
the amount of states' Medicaid supplemental payments and the types of
providers receiving supplemental payments, this report addresses the
following questions:
1. What information do CMS Medicaid expenditure reports provide
regarding Medicaid supplemental payments?
2. In selected states, how much was distributed as Medicaid
supplemental payments, to what types of providers, and for what
purposes?
To determine what information CMS Medicaid expenditure reports provide
regarding the amount and distribution of Medicaid supplemental
payments, we analyzed Medicaid expenditure data reported to CMS by
states on a standardized form, the CMS-64, for the most recent year
available, fiscal year 2006.[Footnote 14] We compiled the amount of DSH
and non-DSH payments reported by individual states and analyzed their
distribution by category of service (such as inpatient hospital, mental
health facility, or nursing facility) and provider category (that
states report as either state government, local government, or private
[Footnote 15]), where those data were available. To understand CMS
expenditure reports, Medicaid reporting requirements, and DSH and non-
DSH supplemental payments, we conducted interviews with CMS officials
and reviewed relevant federal laws, regulations, and guidance. To
assess the reliability of states' CMS-64 submissions, we reviewed the
steps CMS takes to ensure the accuracy of expenditure data submitted by
states. We determined that the data were reliable for use in this
report, and include any limitations identified. A discussion of our
methodology and data reliability assessment can be found in appendix I.
Finally, we discussed planned changes to CMS's Medicaid supplemental
payment reporting requirements with CMS officials.
To examine how Medicaid supplemental payments are distributed to
providers and for what purposes, we surveyed a nongeneralizable sample
of five states: California, Massachusetts, Michigan, New York, and
Texas. We selected these states on the basis of the significance of
their supplemental payments: specifically, we reviewed DSH payment
information reported to CMS and the most complete information available
on non-DSH supplemental payments, which was reported by states to the
Urban Institute, a nonpartisan economic and social policy research
organization, for fiscal year 2005.[Footnote 16] Based on these
sources, the five states we selected spent the largest amount on
Medicaid supplemental payments in 2005, with each state making
estimated payments of more than $1.6 billion that year. Two of the five
states, California and Massachusetts, operated Medicaid demonstrations
during fiscal year 2006 that changed certain characteristics of their
supplemental payment programs. We obtained detailed information from
each of the five states on the supplemental payment programs they had
in place in fiscal year 2006. The data we collected included the amount
of each payment to a provider, the name of the provider that received
the payment, the provider's type (such as hospital, psychiatric
hospital, or nursing facility), and the provider's ownership category.
[Footnote 17] We analyzed the state-reported data to identify how DSH
and non-DSH supplemental payments were distributed among different
types of programs, across provider ownership categories, and across
provider types. To determine the purpose for payments, we asked states
to provide a description of each supplemental payment program they
operated and reviewed the state Medicaid plan provisions that described
the methods and standards used to calculate payments made from these
programs.[Footnote 18] To assess the reliability of states' reported
payment amounts, we compared states' reported payment information to
CMS's expenditure reports, and where we found major differences, we
reported them. We determined that the data were reliable for the
purposes of this report. A discussion of our methodology and data
reliability assessment can be found in appendix I. The findings from
the five reviewed states cannot be used to make inferences about
supplemental payments in other states. We conducted our work from
October 2007 through May 2008 in accordance with generally accepted
government auditing standards.
Results in Brief:
CMS reports show that at least $23 billion was spent on Medicaid
supplemental payments in fiscal year 2006, with the federal share of
these payments totaling over $13 billion, but information on payments
was incomplete. For DSH payments, CMS's expenditure reports show states
and the federal government spent $17.1 billion that year, and
individual states' total DSH payments ranged from less than $1 million
to over $3 billion and represented from less than 1 percent to over 16
percent of state Medicaid payments. For non-DSH payments, the total
amount and distribution of payments made in fiscal year 2006 is
unknown, because states did not separately report all their payments to
CMS. Since 2001, CMS has required states to report certain supplemental
payments on a separate informational section of their expenditure
reports, but states do not receive federal reimbursement based on this
section of the expenditure reports. CMS officials said that they were
updating reporting requirements to obtain better information on
supplemental payments. The agency's plans include requiring separate
reporting of UPL payments by category of service as a condition of
receiving federal matching funds for them and finalizing a rule
proposed in 2005 responding to a federal law requiring states to
provide more detailed information on DSH payments. As of April 2008,
specific implementation dates for these actions had not been
established. CMS officials indicated that their planned actions did not
include requiring states to report UPL payments on a facility-specific
basis, as we had recommended to CMS in 2004. Facility-specific
reporting, we found in 2004, was important to CMS's ability to monitor
payment arrangements. CMS agreed with the 2004 recommendation, but had
not implemented it as of May 2008.
The five states we surveyed--California, Massachusetts, Michigan, New
York, and Texas--reported making $12.3 billion in Medicaid supplemental
payments in fiscal year 2006 through programs with broadly stated
purposes, with half of these payments made to local government
hospitals. Collectively, the five states reported making payments
through 15 DSH and 33 non-DSH programs, with each state operating from
3 to 15 different programs. The five states reported purposes for their
programs that often focused on various categories of eligible providers
serving individuals on Medicaid, with low incomes, or without
insurance. For example, one state had three DSH programs, including two
for public hospitals serving a disproportionate number of Medicaid,
indigent, and uninsured patients, and nine non-DSH programs for
purposes such as uncompensated hospital and clinic costs associated
with health care for the uninsured, nursing facility services for
Medicaid individuals, and construction renovation reimbursement for
local government hospitals serving Medicaid individuals. The state
Medicaid plan sections establishing the states' supplemental payments
did not always clearly identify how the payments would be calculated.
CMS officials said that as part of the agency's oversight initiative
started in 2003, CMS ensures that state plans demonstrate a link
between the distribution of supplemental payments and Medicaid
purposes. However, not all state supplemental payment programs have
been reviewed under CMS's 2003 initiative. In each of the five states,
supplemental payments were concentrated on a small proportion of
providers: the 5 percent of providers receiving the largest amount of
supplemental payments in individual states received between 53 percent
and 71 percent of all state Medicaid supplemental payments. Some
providers received substantial payments from more than one supplemental
payment program.
If CMS obtained better information on states' Medicaid supplemental
payments it would be in a better position to review payments and ensure
that they are appropriately spent for Medicaid purposes. Because CMS
needs improved state reporting on the amount and distribution of
Medicaid supplemental payments to adequately oversee and monitor
states' payments, we believe our 2004 recommendation to improve
reporting on UPL payments, including obtaining facility-specific
payment information, remains valid. In addition, we are recommending
that the Administrator of CMS expedite issuance of a final rule
implementing additional DSH reporting requirements and develop a
strategy to identify all of the supplemental payment programs
established in states' Medicaid plans and to review those that have not
been subject to review under CMS's August 2003 initiative.
In commenting on a draft of this report, HHS stated that CMS generally
agreed with our recommendations and identified a means by which it
could implement our 2004 recommendation to request facility-specific
information on UPL payments. HHS also commented that a 2007 GAO report
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-214] had
officially validated that a May 2007 final rule would address concerns
related to the supplemental payment programs in this report. Certain
elements of the May 2007 rule relate to concerns our past work has
raised. However, we have not assessed or reported on this final rule,
and the extent to which the rule would address our past concerns
related to supplemental payment programs will depend on how it is
implemented. In addition to HHS's comments, we obtained technical
comments from the five states we surveyed, which we incorporated as
appropriate.
Background:
Medicaid--a federal-state partnership that finances health care for low-
income individuals, including children, families, the aged, and the
disabled--provided health coverage for over 60 million individuals in
2007. Title XIX of the Social Security Act established Medicaid as a
joint federal-state program.[Footnote 19] States operate their Medicaid
programs by paying qualified health care providers for a range of
covered services provided to eligible beneficiaries and then seeking
reimbursement for the federal share of those payments. Within broad
federal requirements, each state administers and operates its Medicaid
program in accordance with a state Medicaid plan, which must be
approved by CMS. A state Medicaid plan details the populations a
state's program serves, the services the program covers (such as
physician services, nursing facility care, and inpatient hospital care)
and the methods for calculating payments to providers. The state
Medicaid plan also describes the supplemental payment programs
administered by the state.[Footnote 20]
Medicaid is an open-ended entitlement program, under which the federal
government is obligated to pay its share of expenditures for covered
services provided to eligible individuals under a state's federally
approved Medicaid plan.[Footnote 21] A state may collect up to 60
percent of its Medicaid share from local governments as long as the
state government itself contributes at least 40 percent.[Footnote 22]
Local governments and local government providers can contribute to the
state share[Footnote 23] of Medicaid payments in certain ways, for
example, through intergovernmental fund transfers.[Footnote 24]
DSH payments supplement standard Medicaid payment rates to help offset
certain hospitals' unreimbursed costs. Under federal Medicaid law, each
state receives an annual DSH allotment. DSH allotments are the maximum
amounts of federal matching funds each state is permitted to claim for
DSH payments. States' DSH allotments were first established in 1991
based on each state's historical DSH spending.[Footnote 25] States are
required to make DSH payments to hospitals that treat a
disproportionate share of low-income and Medicaid patients. Federal
Medicaid law caps the amount of DSH funding a state may pay to an
individual hospital each fiscal year: DSH payments cannot exceed the
unreimbursed cost of furnishing hospital services to Medicaid
beneficiaries and the uninsured.[Footnote 26] In determining a
hospital's unreimbursed costs, states must offset costs with all
Medicaid payments received by the hospital, including any UPL payments.
In other words, UPL payments count against a hospital's DSH cap. A
state may establish one or more DSH programs to make DSH payments,
subject to these limits, and each program must be documented by the
state and approved by CMS in the state's Medicaid plan. As with other
Medicaid program changes, to change or initiate a new DSH program, a
state must submit a state plan amendment to CMS for review and approval
prior to implementation.
In contrast to DSH payments, states are not required to establish non-
DSH supplemental payments for providers. Federal Medicaid regulations
establish the UPL as an upper limit on federal reimbursement for
Medicaid payments.[Footnote 27] UPL payments are a product of the gap
between standard Medicaid payment rates and the UPL: in practice,
states' standard Medicaid payments are often less than the UPL, so
states have established supplemental payment programs to make
supplemental payments above standard Medicaid rates but within the UPL.
UPL payments are approved by CMS in states' Medicaid plans. For
example, a state might establish a UPL program to provide additional
payments to certain nursing facilities that serve low-income
populations to fill the gap between what standard Medicaid rates pay
toward the cost of services and higher payments permitted through the
UPL. Some states, including California and Massachusetts, have also in
recent years been allowed to make supplemental payments under Medicaid
demonstrations.[Footnote 28]
To obtain the federal matching funds for Medicaid payments made to
providers, each state files a quarterly expenditure report to CMS. This
expenditure report, known as Form CMS-64, compiles state payments in
over 20 categories of medical services, such as inpatient hospital
services, outpatient hospital services, mental health services, nursing
facility services, and physician services. The CMS-64 expenditure
report captures some information on supplemental payments. For example,
states are required to report their total DSH payments to hospitals and
mental health facilities separately from other Medicaid payments in
order to receive federal reimbursement for them. States are not,
however, required to report disaggregated information on DSH payments
made to individual providers in order to obtain federal matching funds.
Instead, states are required to maintain supporting documentation for
DSH programs, including the amount of DSH payments made to each
hospital, and to make this information available to CMS upon request.
UPL payments are not reported separately from other payments for the
purpose of obtaining federal matching funds. Reporting of supplemental
payments under Medicaid demonstrations can vary by demonstration.
Much attention has been focused on Medicaid supplemental payments, in
part because of concerns that we and others have raised about
inappropriate Medicaid supplemental payment arrangements between states
and certain providers. From 1994 through 2007, we issued reports on
various arrangements whereby states received federal matching funds by
making large supplemental payments to certain government providers,
such as county-owned nursing facilities, in amounts that greatly
exceeded standard Medicaid rates.[Footnote 29] The payments were often
temporary, since some states required government providers to return
all or most of the money to the state government. States used the
federal matching funds received for these payments at their own
discretion, in some cases to finance or pay for the state's share of
the Medicaid program. Since the late 1980s, a variety of regulatory or
legislative actions have been taken at the federal level to curb
inappropriate Medicaid financing arrangements involving excessive
supplemental payments. (See table 1.)
Table 1: Medicaid Arrangements Using Supplemental Payments to
Inappropriately Generate Federal Payments and Federal Actions to
Address Them, 1987 through 2002:
Payment arrangement: Excessive payments to state health facilities;
Description: States made excessive Medicaid payments to state-owned
health facilities, which subsequently returned these funds to the state
treasuries;
Action taken: In 1987, the Health Care Financing Administration[A]
(HCFA) issued regulations that established payment limits specifically
for inpatient and institutional facilities operated by states.
Payment arrangement: Provider taxes and donations;
Description: Revenues from provider-specific taxes on hospitals and
other providers and from provider "donations" were matched with federal
funds and paid to the providers. These providers would then return most
of the federal payment to the states;
Action taken: The Medicaid Voluntary Contribution and Provider-Specific
Tax Amendments of 1991 imposed restrictions on provider donations and
provider taxes.
Payment arrangement: Excessive disproportionate share hospital (DSH)
payments;
Description: DSH payments are meant to compensate hospitals that care
for a disproportionate number of low-income patients. Unusually large
DSH payments were made to certain hospitals, which then returned the
bulk of the state and federal funds to the state;
Action taken: The Omnibus Budget Reconciliation Act of 1993 placed
limits on which hospitals could receive DSH payments and capped the
amount of DSH payments individual hospitals could receive.
Payment arrangement: Excessive DSH payments to state mental hospitals;
Description: A large share of DSH payments were paid to state-operated
psychiatric hospitals, where they were used to pay for services not
covered by Medicaid or were returned to the state treasuries;
Action taken: The Balanced Budget Act of 1997 limited the proportion of
a state's DSH payments that can be paid to institutions of mental
disease and other mental health facilities.
Payment arrangement: Excessive upper payment limit (UPL) payments to
certain local government health facilities;
Description: The UPL is a ceiling on federal matching of Medicaid
expenditures based on what Medicare would pay for comparable services.
The UPL applied to payments aggregated across classes of facilities. As
a result of this aggregate upper limit, states were able to make large
supplemental payments to a few individual government health facilities,
such as county hospitals and nursing facilities. The facilities then
returned the bulk of the state and federal payments to the states;
Action taken: The Medicare, Medicaid, and SCHIP Benefits Improvement
and Protection Act of 2000 required HCFA[A] to issue a final regulation
that established a separate aggregate payment limit for each of several
types of services provided by local government health facilities. HCFAa
issued its final regulation on January 12, 2001. In 2002, CMS issued a
regulation that further lowered the payment limit for local public
hospitals.
Source: GAO.
Note: See GAO, Medicaid: Intergovernmental Transfers Have Facilitated
State Financing Schemes, GAO-04-574T (Washington, D.C.: Mar. 18, 2004).
[A] Before June 2001, CMS was known as the Health Care Financing
Administration (HCFA).
[End of table]
In addition to the regulatory and legislative actions referenced in
table 1, CMS has taken additional steps to improve Medicaid's financial
management and its oversight of states' supplemental payment programs.
These include making internal organizational changes that centralize
the review of state plan amendments, hiring additional staff to analyze
each state's Medicaid program, and increasing the scrutiny of states'
Medicaid supplemental payment programs and the programs' financing
methods. In August 2003, CMS launched an oversight initiative to review
and evaluate the appropriateness of states' Medicaid payments as part
of its efforts to strengthen financial oversight and the fiscal
integrity of the Medicaid program. Under the initiative, a state's
submission of a proposal to change provider payments in its state plan
triggers CMS scrutiny of the appropriateness of any related payment
arrangement. Through this initiative CMS had identified, as of August
2006, 55 supplemental payment programs in 29 states using financing
arrangements in which government providers did not retain all the
supplemental payments made to them and had taken actions to end these
arrangements.[Footnote 30]
In May 2007, CMS published a final rule in part to address concerns
related to states' inappropriate financing arrangements involving
supplemental payments.[Footnote 31] Among other things, the rule, if
implemented, would limit Medicaid reimbursement to certain providers
operated by units of government to an amount that does not exceed the
provider's costs of providing Medicaid-covered services.[Footnote 32],
[Footnote 33] Concerns were raised that the rule would harm certain
providers. Congress placed a moratorium on this rule until May 25,
2008.[Footnote 34]
CMS Reports Show $23 Billion Spent on Medicaid DSH and Non-DSH
Supplemental Payments in Fiscal Year 2006, but This Amount Is Likely
Understated as Information on Non-DSH Payments Is Incomplete:
CMS expenditure reports show that states and the federal government
spent at least $23.48 billion on DSH and non-DSH supplemental payments
in fiscal year 2006, with the federal share of these payments totaling
at least $13.37 billion, but states did not provide complete
information on non-DSH payments. States reported more than $17 billion
in DSH payments and $6 billion in non-DSH supplemental payments in
fiscal year 2006, but the non-DSH payment information was not complete
as states did not report all of their payments. Since 2001, CMS has
required states to report certain supplemental payments on a separate
informational section of their expenditure reports, but states do not
receive federal reimbursement based on this section of the expenditure
reports. CMS officials said that they were updating reporting
requirements to obtain better information on states' supplemental
payments. As of April 2008, specific implementation dates for these
actions had not been established. CMS's planned changes did not include
requiring states to report facility-specific UPL payments, a gap we had
identified in 2004 and recommended that CMS address.
CMS Expenditure Reports Show More Than $17 Billion in DSH Payments Made
in Fiscal Year 2006:
CMS expenditure reports show that states made $17.15 billion in DSH
payments in fiscal year 2006, with the federal government reimbursing
states $9.65 billion for its share of these payments. As illustrated in
figure 1, 48 states and the District of Columbia reported making DSH
payments, with total payments ranging from less than $1 million in
Wyoming to over $3 billion in New York. The 10 states with the largest
total DSH payments in fiscal year 2006 accounted for over 72 percent of
the $17.15 billion nationwide total, and the five states with the
largest total DSH payments--California, New Jersey, New York,
Pennsylvania, and Texas--accounted for more than half of the nationwide
total.
Figure 1: State DSH Supplemental Payments in Fiscal Year 2006:
[See PDF for image]
This figure is a map of the United States depicting state DSH
Supplemental Payments in fiscal year 2006 in five categories, as
follows:
State DSH Supplemental Payments more than $1 billion:
California;
New Jersey;
New York;
Pennsylvania;
Texas.
State DSH Supplemental Payments from $400 million to $1 billion:
Alabama;
Georgia;
Louisiana;
Missouri;
North Carolina;
Ohio;
South Carolina.
State DSH Supplemental Payments from $100 million to $400 million:
Arizona;
Colorado;
Connecticut;
District of Columbia;
Florida;
Illinois;
Indiana;
Kentucky;
Maryland;
Massachusetts;
Michigan;
Mississippi;
New Hampshire;
Rhode Island;
Virginia;
Washington.
State DSH Supplemental Payments up to $100 million:
Alaska;
Arkansas;
Delaware;
Idaho;
Iowa;
Kansas;
Maine;
Minnesota;
Montana;
Nebraska;
Nevada;
New Mexico;
North Dakota;
Oklahoma;
Oregon;
South Dakota;
Utah;
Vermont;
West Virginia;
Wisconsin;
Wyoming.
No payments reported:
Hawaii;
Tennessee.
Source: GAO analysis of CMS-64 expenditure data, Map Resources (map).
Notes: Puerto Rico and the U.S. territories that operate Medicaid
programs are not included on this map because they did not make DSH
payments in fiscal year 2006.
Tennessee and Hawaii did not make DSH payments directly to hospitals in
fiscal year 2006; both states operated Medicaid demonstrations under
which DSH funding is incorporated into payments made to managed care
organizations that provide health coverage to Medicaid beneficiaries.
However, the Tax Relief and Health Care Act of 2006, Pub. L. No. 109-
432, § 404, 120 Stat. 2922, 2995-6 (2006) (codified, as amended, at 42
U.S.C. § 1396r-4(f)(6)), established DSH allotments for both states and
allowed the states to submit changes to their state plan, which, if
approved, would authorize both states to make DSH payments and to
receive federal reimbursement for these payments in fiscal year 2007.
The Medicare, Medicaid, SCHIP Extension Act of 2007, Pub. L. No. 110-
173, § 204, 121 Stat. 2492, 2513-2514 (2007) (codified, as amended, at
42 U.S.C. § 1396r-4(f)(6)) extended the states' authority to make DSH
payments through June 2008.
Massachusetts officials noted that the $346 million Massachusetts
reported as DSH payments on its 2006 expenditure report were actually
non-DSH payments made under a Medicaid demonstration.
[End of figure]
CMS expenditure reports also showed that DSH payments as a percentage
of states' Medicaid payments varied.[Footnote 35] As illustrated in
figure 2, DSH payments ranged from less than 1 percent to over 16
percent of state Medicaid payments.
Figure 2: State DSH Supplemental Payments as a Percentage of States'
Medicaid Payments in Fiscal Year 2006:
[See PDF for image]
This figure is a map of the United States depicting State DSH
Supplemental Payments as a percentage of States' Medicaid payments in
fiscal year 2006 in five categories, as follows:
More than 10 percent:
Alabama;
Louisiana;
Missouri;
New Hampshire;
New Jersey;
South Carolina.
From 5 percent to 10 percent:
California;
Colorado;
Connecticut;
Georgia;
Mississippi;
Nevada;
New York;
North Carolina;
Ohio;
Pennsylvania;
Rhode Island;
Texas;
Washington.
From 1 percent to 5 percent:
Arizona;
Arkansas;
District of Columbia;
Florida;
Idaho;
Illinois;
Indiana;
Iowa;
Kansas;
Kentucky;
Maine;
Maryland;
Massachusetts;
Michigan;
Montana;
Nebraska;
Oklahoma;
Oregon;
Utah;
Vermont;
Virginia;
West Virginia;
Wisconsin.
Up to 1 percent:
Alaska;
Delaware;
Minnesota;
New Mexico;
North Dakota;
South Dakota;
Wyoming.
No payments reported:
Hawaii;
Tennessee.
Notes: Here, the term Medicaid payments refers to a state's medical
assistance payments, which are the total Medicaid payments made by a
state for services, including supplemental payments but not including
administrative costs.
Puerto Rico and the U.S. territories that operate Medicaid programs are
not included on this map because they did not make DSH payments in
fiscal year 2006.
Tennessee and Hawaii did not make separate DSH payments directly to
hospitals in fiscal year 2006; both states operated Medicaid
demonstrations under which DSH funding is incorporated into payments
made to managed care organizations that provide health coverage to
Medicaid beneficiaries. However, the Tax Relief and Health Care Act of
2006, Pub. L. No. 109-432, § 404, 120 Stat. 2922, 2995-6 (2006)
(codified, as amended, at 42 U.S.C. § 1396r-4(f)(6)), established DSH
allotments for both states and allowed the states to submit changes to
their state plan, which, if approved, would authorize both states to
make DSH payments and to receive federal reimbursement for these
payments in fiscal year 2007. The Medicare, Medicaid, SCHIP Extension
Act of 2007, Pub. L. No. 110-173, § 204, 121 Stat. 2492, 2513-2514
(2007) (codified, as amended, at 42 U.S.C. § 1396r-4(f)(6)) extended
the states' authority to make DSH payments through June 2008.
[End of figure]
Appendix II lists each state's total DSH payments in fiscal year 2006
and each state's total as a proportion of the state's Medicaid payments
and of total nationwide DSH payments.
CMS expenditure reports divide DSH payments into two categories of
service: traditional inpatient and outpatient services, and inpatient
and outpatient mental health services. The 2006 CMS expenditure reports
indicate that states made about 80 percent of the total nationwide DSH
payments ($13.48 billion) to hospitals for traditional inpatient and
outpatient services, and about 20 percent of the payments ($3.66
billion) to hospitals for mental health services. (See fig. 3.)
Figure 3: Proportion of Total DSH Payments Made by States, by Category
of Service:
[See PDF for image]
This figure is a pie-chart depicting the following data:
Total 2006 DSH payments by type and share (dollars in billions):
Inpatient/outpatient–federal share: 44% ($7.59);
Inpatient/outpatient–state share: 34% ($5.89);
Mental health–federal share: 12% ($2.05);
Mental health–state share: 9% ($1.61).
Source: GAO analysis of CMS-64 expenditure data.
Note: Percentages do not sum to 100 percent because of rounding.
[End of figure]
CMS Expenditure Reports Show More Than $6 Billion in Non-DSH Payments
Made in Fiscal Year 2006, but States Did Not Provide Complete
Information on Non-DSH Payments:
On 2006 CMS expenditure reports, states reported making $6.33 billion
in non-DSH payments, mainly to hospitals and nursing facilities. The
federal share of these payments was $3.73 billion. States are required
to separately report expenditure data on non-DSH payments made under
the UPL to CMS on an informational section of the CMS-64 expenditure
report called the CMS 64.9I form, but not as a condition of receiving
federal matching funds.[Footnote 36]
On CMS expenditure reports, 28 states reported making non-DSH payments
in fiscal year 2006 with total payments ranging from less than $10
million in Washington to over $1 billion in California. On the CMS
64.9I form, states report payments by category of service for state
government, local government, or private providers.[Footnote 37] As
illustrated in figure 4, the payments states made in fiscal year 2006
covered a range of medical services. Payments made for inpatient
hospital services accounted for 74 percent of the non-DSH payments made
by the states, with payments totaling $4.71 billion (including a
federal share of $2.74 billion). Local government providers received
the largest amount of the non-DSH payments, accounting for 59 percent
of total payments.
Figure 4: Distribution of Non-DSH Payments Reported by 28 States on CMS
Expenditure Reports in Fiscal Year 2006, by Category of Service and by
Category of Provider:
[See PDF for image]
This figure contains two pie-charts depicting the following data:
Payments by category of service (dollars in millions):
Inpatient hospital: 74% ($4,711);
Outpatient hospital: 16% ($1,003);
Nursing homes: 7% ($469);
Physician group: 1% ($66);
Mental health: less than 1% ($27);
Other services: less than 1% ($57).
Payments by category of provider (dollars in millions):
Local government: 59% ($3,754);
Private: 33% ($2,105);
State government: 7% ($473).
Source: GAO analysis of CMS-64.9I forms.
Notes: GAO analyzed data from CMS 64.9I forms from 28 states'
expenditure reports to develop this figure. Percentages do not sum to
100 percent because of rounding.
[End of figure]
See appendix II for more information on the non-DSH supplemental
payments states reported to CMS.
CMS expenditure reports do not capture all of the non-DSH payments made
by states. The Urban Institute, a nonpartisan economic and social
policy research organization, administered a survey of states' 2005
supplemental payments.[Footnote 38] Of the 35 states responding to the
survey, 29 reported that they had made non-DSH supplemental payments
that year. Five states responding to the Urban Institute reported
making non-DSH payments totaling over $1.5 billion in 2005, but did not
report any non-DSH payments on their 2005 CMS 64.9I forms. Twenty-three
states reported to both the Urban Institute and CMS that they made non-
DSH payments, but the amounts reported were different. For example, 4
states reported non-DSH payments to the Urban Institute that were at
least $100 million more than those they reported to CMS; in one case,
the amount reported to Urban Institute was almost $879 million more
than the amount reported to CMS. In addition, in our surveys of 5
states about their supplemental payments, the states reported more to
us in non-DSH payments than they reported on their CMS 64.9I forms,
including more than $2 billion in supplemental payments made under
Medicaid demonstrations.[Footnote 39] Although some differences could
be attributed to differences in how states interpreted the reporting
requirements in each case,[Footnote 40] including whether they included
supplemental payments made under Medicaid demonstrations, these
discrepancies illustrate that the CMS 64.9I forms did not fully capture
non-DSH supplemental payments made by states in fiscal years 2005 and
2006. Although states have been required to complete the CMS 64.9I form
since 2001, states do not receive federal reimbursement based on this
reported information.[Footnote 41]
CMS Plans to Address Many, but Not All, Gaps in State Reporting of
Supplemental Payment Information:
In February 2008, CMS officials told us the agency had planned two
actions to improve reporting on Medicaid supplemental payments. As of
April 2008, specific implementation dates for these actions had not
been established.
* First, officials said that they were redesigning CMS expenditure
reports, in part to improve reporting of supplemental payments, and
were expecting to implement the new report format in summer 2009. CMS
officials told us that in the redesigned report, states would be
required to separately report UPL payments; that is, UPL payments would
no longer be combined with standard Medicaid payments on the section of
the expenditure report that states complete to receive federal
reimbursement. CMS officials said that the redesigned report would
provide a more accurate and complete source of information on states'
Medicaid supplemental payments. According to CMS officials, tentative
plans for the redesigned report included requirements for states to
report information on the distribution of supplemental payments by
category of service.
* Second, officials said that a final rule implementing certain
congressional mandates to establish new DSH reporting requirements is
expected to be issued in 2008. Currently, states must apply a cap on
DSH payments to individual hospitals under federal law, but states'
expenditure reports do not enumerate payments to individual DSH
hospitals. In 2003, however, a law was enacted requiring states to
report additional and more detailed information for each hospital
receiving a DSH payment.[Footnote 42] In response, CMS issued a
proposed rule in 2005. The proposed rule, if finalized, would require
states to separately report detailed information on payment and costs-
-including standard Medicaid payments, DSH payments, UPL payments, and
uncompensated care costs--for each hospital receiving a DSH payment.
[Footnote 43] These reports would be separate from and in addition to
states' expenditure reports.
CMS's planned actions to improve reporting on supplemental payments
will not address all gaps in state reporting of supplemental payments.
The proposed rule, if finalized, would require states to report
facility-specific UPL payments to DSH hospitals. However, states would
not be required to report facility-specific payments made to hospitals
that do not receive DSH payments or payments made to other types of
providers. Further, while CMS officials told us they plan to redesign
the expenditure report to require states to report information on UPL
payments, they were not planning to require facility-specific
reporting. CMS officials expressed concerns that this level of
information could be burdensome to collect and unnecessary and said
that CMS can request this level of reporting detail from states when
they submit state plan amendments to CMS for review. In a 2004 report,
we identified concerns with CMS's lack of comprehensive information on
states' UPL payments--information that we believed was necessary to
adequately oversee the payments, including monitoring for dramatic
changes in payments, conducting timely reviews of states' payments, and
taking timely oversight actions. We recommended in that report that CMS
improve state reporting by requiring all states to report UPL payments
made to all providers and to report these payments on a facility-
specific basis.[Footnote 44] CMS agreed with this recommendation but
had not acted on it as of May 2008.
Five Surveyed States Reported Distributing $12.3 Billion in
Supplemental Payments in Fiscal Year 2006 for Broadly Stated Purposes,
Often to Local Government Hospitals:
The five states we surveyed--California, Massachusetts, Michigan, New
York, and Texas--reported making supplemental payments totaling $12.3
billion in fiscal year 2006 through 15 DSH and 33 non-DSH programs,
with about half of these payments made to hospitals classified as local
government by the states. The five states reported broadly stated
purposes for their programs that often focused on various categories of
eligible providers serving individuals on Medicaid, with low incomes,
or without insurance. About $7.4 billion in DSH payments and $4.9
billion in non-DSH supplemental payments were made to more than 1,500
providers, mainly to hospitals. In each state, supplemental payments
were concentrated on a small proportion of providers, and some
providers received payments through multiple programs.
Information from Five Surveyed States Shows Medicaid Supplemental
Payments Were Distributed through Multiple Programs for Broadly Stated
Purposes:
The five surveyed states reported making payments to 1,531 providers
through a total of 48 supplemental programs in fiscal year 2006,
including 15 DSH programs and 33 non-DSH programs.[Footnote 45] Four of
the five states administered both DSH and non-DSH programs; one state,
Massachusetts, reported having no DSH programs (see table 2). About
$7.4 billion in DSH payments were made to 695 hospitals, or 50 percent
of all hospitals in the four states, and $4.3 billion of the $4.9
billion in non-DSH payments were made to 1,069 nursing facilities and
hospitals, or 13 percent of the nursing facilities and 39 percent of
the hospitals in the five states.
Table 2: Number of Medicaid DSH and Non-DSH Supplemental Payment
Programs, Number of Providers Receiving Payments, and Total Payment
Amounts Made in Fiscal Year 2006, as Reported by the Five Surveyed
States in January 2008 (Dollars in millions):
State: California;
Type of program: DSH;
Number of programs[A]: 3;
Number of providers receiving payments[B]: 159;
Total payments[C]: $2,347.
State: California;
Type of program: Non-DSH[D];
Number of programs[A]: 9;
Number of providers receiving payments[B]: 261;
Total payments[C]: $1,554.
State: California;
Type of program: Total;
Number of programs[A]: 12;
Number of providers receiving payments[B]: 272;
Total payments[C]: $3,900.
State: Massachusetts;
Type of program: DSH;
Number of programs[A]: 0;
Number of providers receiving payments[B]: 0;
Total payments[C]: 0.
State: Massachusetts;
Type of program: Non-DSH[E];
Number of programs[A]: 15;
Number of providers receiving payments[B]: 82;
Total payments[C]: $1,634.
State: Massachusetts;
Type of program: Total;
Number of programs[A]: 15;
Number of providers receiving payments[B]: 82;
Total payments[C]: $1,634.
State: Michigan;
Type of program: DSH;
Number of programs[A]: 6;
Number of providers receiving payments[B]: 127;
Total payments[C]: $427.
State: Michigan;
Type of program: Non-DSH;
Number of programs[A]: 5;
Number of providers receiving payments[B]: 647;
Total payments[C]: $766.
State: Michigan;
Type of program: Total;
Number of programs[A]: 11;
Number of providers receiving payments[B]: 660;
Total payments[C]: $1,193.
State: New York;
Type of program: DSH;
Number of programs[A]: 5;
Number of providers receiving payments[B]: 222;
Total payments[C]: $3,028.
State: New York;
Type of program: Non-DSH;
Number of programs[A]: 2;
Number of providers receiving payments[B]: 48;
Total payments[C]: $421.
State: New York;
Type of program: Total;
Number of programs[A]: 7;
Number of providers receiving payments[B]: 270;
Total payments[C]: $3,449.
State: Texas;
Type of program: DSH;
Number of programs[A]: 1;
Number of providers receiving payments[B]: 187;
Total payments[C]: $1,549.
State: Texas;
Type of program: Non-DSH;
Number of programs[A]: 2;
Number of providers receiving payments[B]: 122;
Total payments[C]: $530.
State: Texas;
Type of program: Total;
Number of programs[A]: 3;
Number of providers receiving payments[B]: 247;
Total payments[C]: $2,079.
State: All five states;
Type of program: DSH;
Number of programs[A]: 15;
Number of providers receiving payments[B]: 695;
Total payments[C]: $7,351.
State: All five states;
Type of program: Non-DSH;
Number of programs[A]: 33;
Number of providers receiving payments[B]: 1,160;
Total payments[C]: $4,905.
State: All five states;
Type of program: Grand total;
Number of programs[A]: 48;
Number of providers receiving payments[B]: 1,531;
Total payments[C]: $12,255.
Source: GAO analysis of data from a GAO survey of five states.
[A] The number of programs listed is the number of programs from which
the states made supplemental payments in 2006.
[B] Some providers received payments from multiple programs; totals
represent numbers of unique providers that received payments.
[C] Payment amounts may not sum to totals because of rounding.
[D] Includes payments that California reported of $912 million made
under three supplemental payment programs authorized by Medicaid
demonstrations.
[E] Includes payments that Massachusetts reported of $1,187 million
under 10 supplemental payment programs authorized by Medicaid
demonstrations.
[End of table]
The five states' supplemental programs were configured in various ways.
One state, Texas, reported making all of its supplemental payments
through three programs--one DSH program and two non-DSH programs, one
directed toward large urban public hospitals and another for rural
hospitals. California made supplemental payments through three DSH
programs and nine non-DSH programs, often targeted to specific provider
types (see table 3).[Footnote 46] Massachusetts reported that it did
not administer a DSH program, but the state administered 15 non-DSH
programs, which were also often targeted to specific provider types,
such as one program titled "Safety Net Care Payments for Pediatric
Specialty Hospitals and Hospitals with Pediatric Specialty Units."
[Footnote 47] See appendix III for a list of all supplemental payment
programs through which the five states made payments in fiscal year
2006.
Table 3: California's Supplemental Payment Programs and Numbers of
Providers Receiving Payments in Fiscal Year 2006, as Reported by the
State in January 2008 (Dollars in millions):
Type of program: DSH;
Program name: DSH Program for Designated Public Hospitals;
Number of providers receiving payments in FY 2006: 23;
Payment amount[A]: $2,051.
Type of program: DSH;
Program name: DSH Program for Non-Designated Public Hospitals;
Number of providers receiving payments in FY 2006: 30;
Payment amount[A]: $11.
Type of program: DSH;
Program name: DSH Payments Made Under Former Methodology;
Number of providers receiving payments in FY 2006: 155;
Payment amount[A]: $285.
Type of program: DSH;
Program name: DSH total;
Number of providers receiving payments in FY 2006: 159[B];
Payment amount[A]: $2,347.
Type of program: Non-DSH;
Program name: Safety Net Care Pool[C];
Number of providers receiving payments in FY 2006: 22;
Payment amount[A]: $801.
Type of program: Non-DSH;
Dollars in millions: Program name: Dollars in millions: DSH Replacement
Payments for Private Hospitals[D]; Number of providers receiving
payments in FY 2006: Dollars in millions: 99; Payment amount[A]:
Dollars in millions: $363.
Type of program: Non-DSH;
Program name: Public Hospital Outpatient Supplemental Reimbursement
Program;
Number of providers receiving payments in FY 2006: 70;
Payment amount[A]: $209.
Type of program: Non-DSH;
Program name: Construction Renovation Reimbursement Program[C];
Number of providers receiving payments in FY 2006: 15;
Payment amount[A]: $87.
Type of program: Non-DSH;
Program name: Enhanced Payments to Private Trauma Hospitals;
Number of providers receiving payments in FY 2006: 11;
Payment amount[A]: $39.
Type of program: Non-DSH;
Program name: Distressed Hospital Fund[C];
Number of providers receiving payments in FY 2006: 11;
Payment amount[A]: $24.
Type of program: Non-DSH;
Program name: Distinct Part/Nursing Facility Supplemental Payment
Program;
Number of providers receiving payments in FY 2006: 19;
Payment amount[A]: $12.
Type of program: Non-DSH;
Program name: Outpatient DSH Payment Program[D];
Number of providers receiving payments in FY 2006: 111;
Payment amount[A]: $10.
Type of program: Non-DSH;
Program name: Small and Rural Hospital Payment Program;
Number of providers receiving payments in FY 2006: 71;
Payment amount[A]: $8.
Type of program: Non-DSH;
Program name: Non-DSH total;
Number of providers receiving payments in FY 2006: 261[B];
Payment amount[A]: $1,554.
Type of program: DSH and non-DSH total;
Number of providers receiving payments in FY 2006: 272[B];
Payment amount[A]: $3,900.
Source: GAO analysis of survey responses from California.
[A] Payment amounts may not sum to totals because of rounding.
[B] Some providers received payments from multiple programs; totals
represent numbers of unique providers that received payments.
[C] Program was authorized under a Medicaid demonstration.
[D] Although the name of this program contains the term DSH, we
considered it to be a non-DSH program because payments were not counted
against the state's DSH allotment.
[End of table]
The five states broadly described each program's purpose in our survey.
The purpose of DSH payments is well established under federal law and
regulation: DSH payments provide compensation to hospitals for
uncompensated care provided to Medicaid and uninsured individuals.
[Footnote 48] States' descriptions of their programs provided some
details on the categories of hospitals that would receive DSH payments
from each program. The purposes for DSH programs, as reported by the
five states, included the following:
* providing supplemental reimbursement to public hospitals that serve a
disproportionate number of Medicaid, indigent, and uninsured patients;
* providing health care services to low-income patients with special
needs who are not covered under other public or private health care
programs;
* providing additional DSH funding for hospitals and hospital systems
that received less than a specified amount from one of the state's
other DSH pools; and:
* ensuring access to services for indigent persons with serious mental
illness requiring inpatient treatment.
In contrast to DSH payments, non-DSH supplemental payments do not have
a specific statutory or regulatory purpose. In some cases, the states'
reported purposes for their non-DSH programs were similar to those of
the DSH programs in that they provided supplemental payments to
hospitals serving Medicaid, indigent, or uninsured individuals, or a
combination of these groups. The purposes of the non-DSH programs for
hospitals and other providers, as reported by the five states, included
the following:
* providing supplemental payments to most of the largest Medicaid
hospital providers in the state;
* supplementing Medicaid payments to certain types of hospitals, such
as rural hospitals, pediatric specialty hospitals, and hospitals
operated by the state Department of Mental Health;
* ensuring access by Medicaid beneficiaries to high-quality hospital or
nursing home care;
* reimbursing public health clinics for their cost of providing
services to Medicaid beneficiaries;
* providing enhanced Medicaid payments for outpatient hospital trauma
and emergency services to private hospitals meeting certain criteria;
* reimbursing public dental clinics for their cost of providing
services to Medicaid beneficiaries;
* providing partial reimbursement of the debt service incurred on
revenue bonds for the construction, renovation, replacement, or
retrofitting of eligible hospitals; and:
* encouraging providers to make available to Medicaid recipients the
most advanced forms of medical diagnostic and treatment services
available through university-based medical service systems.
According to CMS officials, state Medicaid plans should specify the
method by which payment amounts are calculated and how they are
correlated with services provided to Medicaid beneficiaries or, in the
case of DSH programs, to Medicaid beneficiaries or uninsured
individuals. In some cases, we found that the state Medicaid plan
sections establishing the states' supplemental payments did not clearly
identify how the payments would be calculated. CMS officials said that
as part of its oversight initiative started in August 2003, CMS ensures
during its state plan amendment review process that states demonstrate
a link between the distribution of supplemental payments and Medicaid
purposes, which would include uncompensated care in the case of DSH
payments. Such vetting only occurs, however, as states establish new
supplemental payment programs or make changes to established programs.
Thus, not all state supplemental payment programs have been reviewed
under CMS's 2003 initiative. In the case of the 35 supplemental payment
programs operated by the five states we surveyed that were approved
under the states' Medicaid plans,[Footnote 49] 6 programs (17 percent)
had not been reviewed and approved by CMS through the state plan
amendment process since the beginning of the oversight initiative that
started in August 2003.[Footnote 50] State officials told us that these
6 programs had not been changed since CMS's 2003 initiative or subject
to review under the initiative. We were unable to determine from
states' documentation when 5 additional supplemental payment programs
were most recently reviewed and approved by CMS.
Surveyed States Reported Paying the Largest Portion of Medicaid
Supplemental Payments to Local Government Hospitals:
Of the $12.3 billion in total supplemental payments reported by the
five states, $11.3 billion, or 92 percent, was made to hospitals and
the remainder went to other types of providers, specifically nursing
facilities, clinics, physician groups, and, in one state, managed care
organizations.[Footnote 51] The states reported that local government
providers received the majority (57 percent) of supplemental payments.
Local government hospitals, in particular, received 51 percent of
supplemental payments reported by the five states.
Distribution of Supplemental Payments by Provider Type:
In each of the five states, hospitals received a majority of the
state's total supplemental payments. (See fig. 5.) The five states
reported making $7.4 billion in DSH payments and $3.9 billion in non-
DSH payments (80 percent of all non-DSH payments) to hospitals,
including psychiatric hospitals, in fiscal year 2006.
Figure 5: Distribution of Supplemental Payments Made in Fiscal Year
2006 across Different Types of Providers, as Reported by the Five
Surveyed States in January 2008:
[See PDF for image]
This figure is a stacked vertical bar graph depicting the following
data:
Percentage of state supplemental payments (by dollars paid to provider
type):
State: California;
Hospitals: 99.7%;
Managed care: 0;
Psychiatric hospitals: 0;
Nursing facilities: 0.3%;
Clinics: 0;
Physician groups: 0.
State: Massachusetts;
Hospitals: 57.1%;
Managed care: 35.3%;
Psychiatric hospitals: 6.4%;
Nursing facilities: 0;
Clinics: 0;
Physician groups: 1.2%.
State: Michigan;
Hospitals: 60.1%;
Managed care: 0;
Psychiatric hospitals: 11.9%;
Nursing facilities: 23.6%;
Clinics: 1.6%;
Physician groups: 2.8%.
State: New York;
Hospitals: 81.4%;
Managed care: 0;
Psychiatric hospitals: 17.5%;
Nursing facilities: 1%;
Clinics: 0;
Physician groups: 0.
State: Texas;
Hospitals: 100%;
Managed care: 0;
Psychiatric hospitals: 0;
Nursing facilities: 0;
Clinics: 0;
Physician groups: 0.
State: All 5 states;
Hospitals: 85.1%;
Managed care: 4.7%;
Psychiatric hospitals: 6.9%;
Nursing facilities: 2.7%;
Clinics: 0.2%;
Physician groups: 0.4%.
Source: GAO analysis of data from a GAO survey of five states.
[End of figure]
Four of the five states reported making non-DSH payments to types of
providers other than hospitals, such as managed care organizations,
nursing facilities, clinics, and physician groups. Payments to these
other types of facilities and providers totaled nearly $1 billion,
including the following:
* $577 million paid to managed care organizations,
* $329 million paid to nursing facilities,
* $53 million paid to physician groups, and:
* $19 million paid to clinics.
See appendix IV for details on the distribution of each state's DSH and
non-DSH payments by provider type.
Distribution of Supplemental Payments by Ownership Category:
All five states reported distributing supplemental payments to
providers in each of three categories: state government, local
government, and private providers. Overall, $6.9 billion, or 57
percent, of the total supplemental payments made by the five states in
fiscal year 2006 were paid to local government providers. (See fig. 6.)
At the individual state level, the distribution across categories
varied. The proportion of payments made to local government providers,
for example, ranged from a low of 20 percent in Michigan to a high of
73 percent in California. In California, Massachusetts, New York, and
Texas, local government providers received the largest proportion of
the state's supplemental payments. Michigan reported that private
providers received the largest portion (68 percent) of the state's
supplemental payments.
Figure 6: Distribution of Supplemental Payments Made in Fiscal Year
2006 by Provider Ownership Category, as Reported by the Five Surveyed
States in January 2008:
[See PDF for image]
This figure is a stacked vertical bar graph depicting the following
data:
Percentage of state supplemental payments (by dollars paid to provider
ownership class):
State: California;
Local government: 72.9%;
State government: 13.8%;
Private: 13.4%.
State: Massachusetts;
Local government: 49.1%;
State government: 8.2%;
Private: 42.7%.
State: Michigan;
Local government: 20.1%;
State government: 11.9%;
Private: 68%.
State: New York;
Local government: 53.4%;
State government: 24.1%;
Private: 22.5%.
State: Texas;
Local government: 58.1%;
State government: 21.8%;
Private: 20.1%.
State: All 5 states;
Local government: 56.5%;
State government: 17.1%;
Private: 26.3%.
Source: GAO analysis of data from a GAO survey of five states.
[End of figure]
See appendix IV for details on the distribution of each state's DSH and
non-DSH payments by ownership category.
Distribution of Supplemental Payments by Provider Type and Ownership
Category Combined:
Of the total supplemental payments made by the five states in fiscal
year 2006, states reported that $6.2 billion, or 51 percent, were made
to local government hospitals, as illustrated in table 4. The
distribution of payments by both provider type and ownership category
differed from state to state. In three states--California, Texas, and
New York--the majority of payments were made to local government
hospitals. In Michigan, the largest portion of the state's total
supplemental payments--$572 million, or 48 percent of payments--was
paid to private hospitals, and the second largest portion of the
state's supplemental payments--$238 million, or 20 percent of payments-
-was paid to private nursing facilities. In Massachusetts, the largest
portion of the state's supplemental payments--$679 million, or 42
percent of payments--was paid to private hospitals, and the second
largest portion--$577 million, or 35 percent of payments--was paid to
local government managed care organizations.[Footnote 52]
Table 4: Supplemental Payments Made in Fiscal Year 2006, Grouped by
Provider Type and Category of Ownership and Ranked by Total Payment
Amount, as Reported by the Five Surveyed States in January 2008
(Dollars in millions):
Total reported payments: $12.3 billion.
Rank: 1;
Provider type: Hospital;
Category of ownership[A]: Local government;
Number of states making payments: 5;
Payment amount: $6,212;
Payments as percentage of total supplemental payments[B]: 51%.
Rank: 2;
Provider type: Hospital;
Category of ownership[A]: Private;
Number of states making payments: 5;
Payment amount: $2,965;
Payments as percentage of total supplemental payments[B]: 24%.
Rank: 3;
Provider type: Hospital;
Category of ownership[A]: State government;
Number of states making payments: 4;
Payment amount: $1,248;
Payments as percentage of total supplemental payments[B]: 10%.
Rank: 4;
Provider type: Psychiatric hospital;
Category of ownership[A]: State government;
Number of states making payments: 3;
Payment amount: $852;
Payments as percentage of total supplemental payments[B]: 7%.
Rank: 5;
Provider type: Managed care organization;
Category of ownership[A]: Local government;
Number of states making payments: 1;
Payment amount: $577;
Payments as percentage of total supplemental payments[B]: 5%.
Rank: 6;
Provider type: Nursing facility;
Category of ownership[A]: Private;
Number of states making payments: 1;
Payment amount: $238;
Payments as percentage of total supplemental payments[B]: 2%.
Rank: 7;
Provider type: Nursing facility;
Category of ownership[A]: Local government;
Number of states making payments: 3;
Payment amount: $91;
Payments as percentage of total supplemental payments[B]: 1%.
Rank: 8;
Provider type: Physicians group;
Category of ownership[A]: Local government;
Number of states making payments: 1;
Payment amount: $34;
Payments as percentage of total supplemental payments[B]: 0%.
Rank: 9;
Provider type: Clinic;
Category of ownership[A]: Local government;
Number of states making payments: 1;
Payment amount: $19;
Payments as percentage of total supplemental payments[B]: 0%.
Rank: 10;
Provider type: Physicians group;
Category of ownership[A]: Private;
Number of states making payments: 1;
Payment amount: $19;
Payments as percentage of total supplemental payments[B]: 0%.
Total:
Payment amount: $12,255;
Payments as percentage of total supplemental payments[B]: 100%.
Source: GAO analysis of data from a GAO survey of five states.
[A] Category of ownership is as reported by states. State-reported
ownership category was not always the same as the type of the
organization that operated the facility as recorded in a database of
providers maintained by CMS. See app. IV for more information.
[B] Percentages less than 0.5 percent were rounded to zero.
[End of table]
A Small Proportion of Providers Received Over Half of the Supplemental
Payments, and Some Providers Received Payments from Multiple Programs:
Information from the five states shows that a small proportion of
providers received a large proportion of each state's supplemental
payments. Specifically, the 5 percent of providers receiving the
largest supplemental payments in individual states received between 53
percent and 71 percent of all Medicaid supplemental payments. (See fig.
7.) In two states, non-DSH supplemental payments were particularly
concentrated: in New York, the top 5 percent of providers receiving non-
DSH payments accounted for 91 percent of the total non-DSH payments,
and in Texas, the top 5 percent of providers accounted for 76 percent
of the total non-DSH payments.
Figure 7: Proportion of Fiscal Year 2006 Supplemental Payments Made to
Top 5 Percent of Providers, by Payment Type, in Each of the Five
Surveyed States, as Reported by States in January 2008:
[See PDF for image]
This figure is a multiple vertical bar graph depicting the following
data:
Percentage of supplemental payments paid to top 5 percent of providers:
State: California;
DSH: 58.7%;
Non-DSH: 53.9%;
All payments: 70.9%.
State: Massachusetts;
DSH: 0;
Non-DSH: 63.1%;
All payments: 63.1%.
State: Michigan;
DSH: 53.7%;
Non-DSH: 43.6%;
All payments: 57.5%.
State: New York;
DSH: 45%;
Non-DSH: 91.4%;
All payments: 52.9%.
State: Texas;
DSH: 48.8%;
Non-DSH: 76.2%;
All payments: 62.8%.
State: All 5 states;
DSH: 50.7%;
Non-DSH: 61%;
All payments: 62.1%.
Source: GAO analysis of data from a GAO survey of five states.
Note: For each state, we identified the percentage of payments made to
the 5 percent of providers receiving the largest amount of DSH
payments, the 5 percent of providers receiving the largest amount of
non-DSH payments, and the 5 percent of providers receiving the largest
combined amount of DSH and non-DSH payments. For all five states
combined, we calculated the percentages by adding the payments made to
the 5 percent of providers receiving the largest amount of payments in
each state and dividing this number by the total payments made by all
five states.
[End of figure]
See appendix V for additional information on the concentration of
supplemental payments reported by the five states.
In the five surveyed states, 30 percent of the 1,531 providers
receiving supplemental payments received payments from multiple
programs, accounting for 69 percent of their supplemental payments.
[Footnote 53] The percentage of providers receiving payments from
multiple programs in each state ranged from a low of 17 percent in
Massachusetts to a high of 65 percent in California. Some providers
received substantial payments from more than one supplemental payment
program. For example, in one state one hospital received $420 million
in DSH payments and $154 million in non-DSH supplemental payments in
fiscal year 2006. In another state one hospital received $173 million
in DSH payments and $73 million in non-DSH supplemental payments that
year.
Appendix V provides additional information on the extent to which
providers in five states received supplemental payments from multiple
programs.
Conclusions:
Pressures on federal and state budgets have focused attention both on
the importance of the Medicaid program and on its high costs. As a
source of health care for the nation's most vulnerable populations,
Medicaid's long-term sustainability is critical to millions of people.
However, sustaining the $299 billion program will require ensuring that
expenditures are appropriately limited to Medicaid purposes.
Supplemental payment programs have historically been susceptible to
abuse, particularly programs involving large payments to government
providers that allowed states to inappropriately leverage federal
Medicaid matching funds. Legislative, regulatory, and other agency
actions have addressed some of these concerns.
States made supplemental payments totaling at least $23 billion in
fiscal year 2006, and the federal government spent over $13 billion in
matching funds for these payments. Despite the significance of
supplemental payments, CMS lacks complete information on states'
payments and has not reviewed all supplemental payment programs under
its 2003 initiative. To provide effective oversight, federal officials
need reliable and complete information, including information on all
programs administered by states as well as information on the providers
that receive payments from these programs. Complete information about
the distribution of Medicaid supplemental payments, however, is still
lacking at the federal level. For example, complete data on non-DSH
payments and data on DSH and non-DSH supplemental payments made to
individual providers are not available from CMS expenditure reports.
Congress has long sought better information on DSH payments, including
information on payments to individual providers, and we have expressed
similar concerns over the lack of information related to non-DSH
payments. CMS is planning to take action in 2008 to finalize a rule
proposed in 2005 that would implement detailed DSH reporting in
response to federal statutory requirements and also plans to make
improvements to its expenditure reports to collect data on some non-DSH
payments. These planned actions address many of the gaps in state
reporting of supplemental payments and should be put into effect as
soon as possible. Even when they are implemented, however, states will
not be required to report all of the supplemental payments that they
make to individual providers.
We believe that a recommendation from our prior work that CMS improve
state reporting of UPL payments, including collecting information on
payments by facility, remains valid. Such an improvement could be
achieved by establishing reporting requirements for non-DSH
supplemental payments, such as collecting payment information on a
facility-specific basis, comparable to those proposed for DSH payments.
In 2004, CMS agreed with the recommendation that it improve its UPL
reporting requirements and collect facility-specific payment
information, but as of May 2008, had not implemented it. Furthermore,
not all supplemental payment programs have been subject to CMS review
through the oversight initiative that CMS began in 2003 to assess and
ensure the appropriateness of state supplemental payments. Until
reliable and complete information on states' supplemental payments is
available, federal officials overseeing the program and others will
lack information they need to review payments and ensure that they are
appropriately spent for Medicaid purposes.
Recommendations for Executive Action:
To improve the oversight of states' Medicaid supplemental payments, we
recommend that the Administrator of CMS take the following two actions:
* expedite issuance of the final rule implementing additional DSH
reporting requirements, and:
* develop a strategy to identify all of the supplemental payment
programs established in states' Medicaid plans and to review those
programs that have not been subject to review under CMS's August 2003
initiative.
Agency Comments and Our Evaluation:
We provided a draft of this report to HHS for comment. In its response,
HHS stated that CMS generally agreed with our recommendations to
expedite issuance of the final DSH rule and to develop a strategy to
review all state supplemental payment programs to ensure they are
consistent with Medicaid requirements. HHS also identified a means by
which it could implement our 2004 recommendation to request facility-
specific information on UPL payments.
HHS provided additional comments that it believed were critically
important to the final report. HHS stated that the final rule
implementing DSH payment reporting requirements will only collect
facility-specific supplemental payment information for hospitals that
qualify for DSH payments, and that hospitals that do not receive DSH
payments and non-hospital Medicaid providers are not subject to the
rule. We note that our draft report contained this information.
Further, because of these and other data reporting limitations, we
determined our 2004 recommendation that CMS improve its requirements
for states for reporting UPL payments, such as requiring states to
report payments on a facility-specific basis, was still valid. HHS said
the volume of information that would be collected under this
recommendation could not feasibly be transmitted through the Medicaid
Budget and Expenditure System, a system states use to submit Medicaid
expenditure data to CMS. We note that we have not specified the system
by which improved UPL information should be collected. HHS also
provided an example of one means it could use to obtain facility-
specific information through its review of states' Medicaid expenditure
reports. In our view, the billions of dollars paid annually in non-DSH
supplemental payments warrants improved reporting of information on
payments comparable to planned DSH reporting requirements, including
reporting of facility-specific payment information.
HHS also noted that states are entitled each year to expend their
entire allotment and that therefore, the $17 billion DSH spending
referenced in the draft report will largely remain unchanged after
issuance of the final DSH rule. Although improved reporting may not
result in DSH savings, we maintain that having improved and audited
data on DSH and other supplemental payments at the facility level is
important to ensuring that facility-specific DSH limits are not
exceeded and that payments are appropriate.
In its general comments, HHS asserted that GAO had officially validated
that a May 2007 final rule would address concerns related to the
supplemental payment programs in this report. Some aspects of the May
2007 rule relate to concerns about supplemental payment programs raised
in our past work. However, we have not assessed or reported on this
final rule, and the extent to which the rule would address our past
concerns will depend on how it is implemented.
We also obtained technical comments from California, Massachusetts,
Michigan, New York, and Texas, which we considered and incorporated as
appropriate.
As arranged with your office, unless you publicly announce the contents
of this report earlier, we plan no further distribution until 30 days
after its issuance date. At that time, we will send copies of this
report to the Secretary of Health and Human Services, the Administrator
of the Centers for Medicare & Medicaid Services, and other interested
parties. We will also make copies available to others upon request. In
addition, the report will be available at no charge on the GAO Web site
at [hyperlink, http://www.gao.gov].
If you or your staff members have any questions, please contact me at
(202) 512-7114 or cosgrovej@gao.gov. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last
page of this report. Major contributors to this report are listed in
appendix VII.
Sincerely yours,
Signed by:
James C. Cosgrove:
Director, Health Care Issues:
[End of section]
Appendix I: Scope and Methodology:
This appendix describes in detail how we did our work for our review of
states' Medicaid supplemental payments to hospitals through states'
Disproportionate Share Hospital (DSH) programs and to providers through
states' other supplemental payment programs, permitted under Medicaid's
Upper Payment Limit (UPL) provisions or under Medicaid demonstration
authority, which in this report we refer to as non-DSH programs.
[Footnote 54] We reviewed states' supplemental payments nationwide by
examining Medicaid expenditures reported by states to the Centers for
Medicare & Medicaid Services (CMS) on Form CMS-64. We also selected a
nongeneralizable sample of five states and collected information about
the supplemental payments made to providers from each of their
supplemental payment programs.
Analysis of CMS Expenditure Reports:
To determine what CMS Medicaid expenditure reports show regarding the
amount and distribution of DSH and non-DSH payments, we examined the
standardized expenditure reports states submit to CMS on a quarterly
basis, Form CMS-64. States submit CMS-64 expenditure data
electronically to the Medicaid Budget and Expenditure System and must
certify that the data are correct to the best of their knowledge. We
reviewed expenditure data provided to CMS from all states for fiscal
year 2006, the most recent year for which complete data were available.
[Footnote 55] We obtained fiscal year 2006 DSH payments from CMS's
Financial Management Report (FMR). The FMR summarizes each state's
quarterly expenditures reports as a fiscal year total. The FMR
incorporates payment adjustments reported by the states. For non-DSH
supplemental payments, we extracted expenditure data reported on the
CMS 64.9I form, a section of the CMS expenditure report on which states
are required to report non-DSH supplemental payments made under the UPL
for informational purposes. CMS allows states to make adjustments to
their prior CMS-64 submissions for up to 2 years. For DSH payments, the
FMR for 2006 incorporated payment adjustments that had been reported
through the end of fiscal year 2006. For non-DSH payments we
incorporated payment adjustments to the CMS 64.9I forms submitted by
the states through October 5, 2007.
We compiled the amount of DSH and non-DSH payments reported by
individual states and analyzed their distribution by category of
service (such as inpatient hospital, mental health facility, or nursing
facility) and by provider category (that states report as either state
government, local government, or private[Footnote 56]), where those
data were available.
To assess the reliability of states' CMS-64 submissions, we reviewed
the steps CMS takes to ensure the accuracy of expenditure data
submitted to the Medicaid Budget and Expenditure System. We also
compared these expenditure data to data the five selected states
submitted to us and compared the non-DSH expenditure data to similar
data published by the Urban Institute. To understand CMS expenditure
reports, Medicaid reporting requirements, and DSH and non-DSH
supplemental payments, we conducted interviews with CMS officials and
reviewed relevant laws, regulations, and guidance. We concluded that
states' reported DSH payments in fiscal year 2006 were sufficiently
reliable for use in this report because CMS reimburses states based on
these data and because CMS also reports these data publicly on its Web
site. However, we determined that states' reported data on non-DSH
payments in fiscal year 2006 were less reliable than data on DSH
payments. States are required to submit non-DSH payment information
separately from, and in addition to, their base expenditures. CMS does
not reimburse states on the basis of these data.[Footnote 57] We did
not examine reporting requirements under specific states' Medicaid
demonstrations.[Footnote 58] We concluded that states' reported fiscal
year 2006 non-DSH payments were suitable for limited, descriptive
purposes, and we noted the limitations of these expenditure data in the
report. We also compared information on Medicaid supplemental payments
provided to us by the five selected states (based on the selection
criteria described below) with the information the states reported on
CMS expenditure reports. Where we found major discrepancies, we noted
them in the report and included state officials' explanations for some
of the differences.
See appendix II for results of our analysis of CMS expenditure reports.
Analysis of the Distribution of Supplemental Payments in Five Selected
States:
To examine how Medicaid supplemental payments are distributed to
providers and for what purposes, we surveyed a nongeneralizable sample
of five states--California, Massachusetts, Michigan, New York, and
Texas. We selected these states because they reported spending the
largest amount on Medicaid supplemental payments in fiscal year 2005
based on the combined total of their DSH payments (as reported to CMS)
and estimated non-DSH payments (imputed from data published by the
Urban Institute).[Footnote 59] The five states each reported making
more than $1.6 billion in estimated Medicaid supplemental payments in
2005. The estimated combined total of these states' Medicaid
supplemental payments accounted for more than 40 percent of the
estimated fiscal year 2005 Medicaid supplemental payments for all
states. Two of the five states,
California and Massachusetts, operated Medicaid demonstrations that
changed certain characteristics of their supplemental payment programs.
[Footnote 60]
In January 2008, we obtained information from each state about fiscal
year 2006 DSH and non-DSH payments, including the amount of each
payment, the name of the provider that received the payment, the
provider's type (such as hospital, nursing facility, or clinic), and
the provider's ownership category (state government, local government,
or private).[Footnote 61] We also interviewed state officials about
their Medicaid supplemental payments. To determine the purpose for
programs, we asked states to provide a description of each supplemental
payment program they operated, and assessed the state Medicaid plan
provisions that describe the methods and standards used to calculate
payments made from these programs.[Footnote 62] To assess the
reliability of states' reported payment amounts, we compared states'
reported payment information to CMS's expenditure reports, and where we
found major differences, we reported them. For other provider data
reported by states, specifically, information on provider ownership
category, we compared states' data with provider data in CMS's On-Line
Survey, Certification, and Reporting system that contains information
on the type of organization that operates the facilities.[Footnote 63]
We provide examples of differences we found in states' information as
compared to CMS's. Although the scope of this review did not include
identifying the reasons for them, differences in payment amounts may be
due to payment adjustments made after we extracted CMS data and states
not reporting supplemental payments made under Medicaid demonstrations
on the CMS 64.9I form. We have reported the information as reported to
us by states. The findings from our nongeneralizable sample of five
states cannot be used to make inferences about supplemental payment
programs in other states. See appendixes III through V for the results
of our analysis of the state-reported data.
We conducted our work from October 2007 through May 2008 in accordance
with generally accepted government auditing standards.
[End of section]
Appendix II: Information on Medicaid Supplemental Payments in the
States and the District of Columbia, as Reported by States:
This appendix provides payment information, by state, compiled from
fiscal year 2006 CMS-64 expenditure reports. Table 5 provides the
amount of DSH payments by state and also identifies for each state (1)
the proportion of the state's total Medicaid payments accounted for by
DSH payments and (2) the proportion of nationwide DSH payments
accounted for by the state's DSH payments. Table 6 provides similar
information, by state, for the non-DSH payments that 28 states reported
to CMS for informational purposes on the CMS 64.9I form.
Table 5: State DSH Payments Made in Fiscal Year 2006 as a Percentage of
Total State Medicaid Payments and Total National DSH Payments, by State
(Dollars in millions):
State: Alabama;
State DSH payments: Total state Medicaid payments[A]: $3,860;
State DSH payments: Total: $417;
State DSH payments: Federal share: $290;
Total state DSH payments as percentage of total state Medicaid
payments: 10.80%;
Total state DSH payments as percentage of total national DSH payments:
2.43%.
State: Alaska;
State DSH payments: Total state Medicaid payments[A]: $945;
State DSH payments: Total: $7;
State DSH payments: Federal share: $4;
Total state DSH payments as percentage of total state Medicaid
payments: 0.74%;
Total state DSH payments as percentage of total national DSH payments:
0.04%.
State: Arizona;
State DSH payments: Total state Medicaid payments[A]: $6,189;
State DSH payments: Total: $138;
State DSH payments: Federal share: $93;
Total state DSH payments as percentage of total state Medicaid
payments: 2.24%;
Total state DSH payments as percentage of total national DSH payments:
0.81%.
State: Arkansas;
State DSH payments: Total state Medicaid payments[A]: $2,854;
State DSH payments: Total: $39;
State DSH payments: Federal share: $29;
Total state DSH payments as percentage of total state Medicaid
payments: 1.37%;
Total state DSH payments as percentage of total national DSH payments:
0.23%.
State: California;
State DSH payments: Total state Medicaid payments[A]: $33,840;
State DSH payments: Total: $2,339;
State DSH payments: Federal share: $1,169;
Total state DSH payments as percentage of total state Medicaid
payments: 6.91%;
Total state DSH payments as percentage of total national DSH payments:
13.64%.
State: Colorado;
State DSH payments: Total state Medicaid payments[A]: $2,850;
State DSH payments: Total: $174;
State DSH payments: Federal share: $87;
Total state DSH payments as percentage of total state Medicaid
payments: 6.11%;
Total state DSH payments as percentage of total national DSH payments:
1.02%.
State: Connecticut;
State DSH payments: Total state Medicaid payments[A]: $4,068;
State DSH payments: Total: $269;
State DSH payments: Federal share: $134;
Total state DSH payments as percentage of total state Medicaid
payments: 6.61%;
Total state DSH payments as percentage of total national DSH payments:
1.57%.
State: Delaware;
State DSH payments: Total state Medicaid payments[A]: $946;
State DSH payments: Total: $4;
State DSH payments: Federal share: $2;
Total state DSH payments as percentage of total state Medicaid
payments: 0.44%;
Total state DSH payments as percentage of total national DSH payments:
0.02%.
State: District of Columbia;
State DSH payments: Total state Medicaid payments[A]: $1,285;
State DSH payments: Total: $45;
State DSH payments: Federal share: $31;
Total state DSH payments as percentage of total state Medicaid
payments: 3.48%;
Total state DSH payments as percentage of total national DSH payments:
0.26%.
State: Florida;
State DSH payments: Total state Medicaid payments[A]: $12,621;
State DSH payments: Total: $320;
State DSH payments: Federal share: $188;
Total state DSH payments as percentage of total state Medicaid
payments: 2.53%;
Total state DSH payments as percentage of total national DSH payments:
1.86%.
State: Georgia;
State DSH payments: Total state Medicaid payments[A]: $6,480;
State DSH payments: Total: $425;
State DSH payments: Federal share: $257;
Total state DSH payments as percentage of total state Medicaid
payments: 6.55%;
Total state DSH payments as percentage of total national DSH payments:
2.48%.
State: Hawaii[B];
State DSH payments: Total state Medicaid payments[A]: $1,091;
State DSH payments: Total: $0;
State DSH payments: Federal share: $0;
Total state DSH payments as percentage of total state Medicaid
payments: 0.00%;
Total state DSH payments as percentage of total national DSH payments:
0.00%.
State: Idaho;
State DSH payments: Total state Medicaid payments[A]: $1,027;
State DSH payments: Total: $16;
State DSH payments: Federal share: $12;
Total state DSH payments as percentage of total state Medicaid
payments: 1.60%;
Total state DSH payments as percentage of total national DSH payments:
0.10%.
State: Illinois;
State DSH payments: Total state Medicaid payments[A]: $9,967;
State DSH payments: Total: $209;
State DSH payments: Federal share: $105;
Total state DSH payments as percentage of total state Medicaid
payments: 2.10%;
Total state DSH payments as percentage of total national DSH payments:
1.22%.
State: Indiana;
State DSH payments: Total state Medicaid payments[A]: $5,637;
State DSH payments: Total: $161;
State DSH payments: Federal share: $101;
Total state DSH payments as percentage of total state Medicaid
payments: 2.86%;
Total state DSH payments as percentage of total national DSH payments:
0.94%.
State: Iowa;
State DSH payments: Total state Medicaid payments[A]: $2,539;
State DSH payments: Total: $27;
State DSH payments: Federal share: $17;
Total state DSH payments as percentage of total state Medicaid
payments: 1.07%;
Total state DSH payments as percentage of total national DSH payments:
0.16%.
State: Kansas;
State DSH payments: Total state Medicaid payments[A]: $2,057;
State DSH payments: Total: $58;
State DSH payments: Federal share: $35;
Total state DSH payments as percentage of total state Medicaid
payments: 2.82%;
Total state DSH payments as percentage of total national DSH payments:
0.34%.
State: Kentucky;
State DSH payments: Total state Medicaid payments[A]: $4,329;
State DSH payments: Total: $197;
State DSH payments: Federal share: $137;
Total state DSH payments as percentage of total state Medicaid
payments: 4.56%;
Total state DSH payments as percentage of total national DSH payments:
1.15%.
State: Louisiana;
State DSH payments: Total state Medicaid payments[A]: $4,688;
State DSH payments: Total: $740;
State DSH payments: Federal share: $516;
Total state DSH payments as percentage of total state Medicaid
payments: 15.78%;
Total state DSH payments as percentage of total national DSH payments:
4.31%.
State: Maine;
State DSH payments: Total state Medicaid payments[A]: $1,897;
State DSH payments: Total: $48;
State DSH payments: Federal share: $30;
Total state DSH payments as percentage of total state Medicaid
payments: 2.51%;
Total state DSH payments as percentage of total national DSH payments:
0.28%.
State: Maryland;
State DSH payments: Total state Medicaid payments[A]: $4,916;
State DSH payments: Total: $122;
State DSH payments: Federal share: $61;
Total state DSH payments as percentage of total state Medicaid
payments: 2.47%;
Total state DSH payments as percentage of total national DSH payments:
0.71%.
State: Massachusetts;
State DSH payments: Total state Medicaid payments[A]: $9,561;
State DSH payments: Total: $346[C];
State DSH payments: Federal share: $173;
Total state DSH payments as percentage of total state Medicaid
payments: 3.62%;
Total state DSH payments as percentage of total national DSH payments:
2.02%.
State: Michigan;
State DSH payments: Total state Medicaid payments[A]: $8,237;
State DSH payments: Total: $384;
State DSH payments: Federal share: $217;
Total state DSH payments as percentage of total state Medicaid
payments: 4.66%;
Total state DSH payments as percentage of total national DSH payments:
2.24%.
State: Minnesota;
State DSH payments: Total state Medicaid payments[A]: $5,367;
State DSH payments: Total: $38;
State DSH payments: Federal share: $19;
Total state DSH payments as percentage of total state Medicaid
payments: 0.71%;
Total state DSH payments as percentage of total national DSH payments:
0.22%.
State: Mississippi;
State DSH payments: Total state Medicaid payments[A]: $3,240;
State DSH payments: Total: $171;
State DSH payments: Federal share: $130;
Total state DSH payments as percentage of total state Medicaid
payments: 5.28%;
Total state DSH payments as percentage of total national DSH payments:
1.00%.
State: Missouri;
State DSH payments: Total state Medicaid payments[A]: $6,382;
State DSH payments: Total: $740;
State DSH payments: Federal share: $458;
Total state DSH payments as percentage of total state Medicaid
payments: 11.59%;
Total state DSH payments as percentage of total national DSH payments:
4.31%.
State: Montana;
State DSH payments: Total state Medicaid payments[A]: $720;
State DSH payments: Total: $11;
State DSH payments: Federal share: $8;
Total state DSH payments as percentage of total state Medicaid
payments: 1.56%;
Total state DSH payments as percentage of total national DSH payments:
0.07%.
State: Nebraska;
State DSH payments: Total state Medicaid payments[A]: $1,499;
State DSH payments: Total: $23;
State DSH payments: Federal share: $14;
Total state DSH payments as percentage of total state Medicaid
payments: 1.54%;
Total state DSH payments as percentage of total national DSH payments:
0.13%.
State: Nevada;
State DSH payments: Total state Medicaid payments[A]: $1,175;
State DSH payments: Total: $80;
State DSH payments: Federal share: $44;
Total state DSH payments as percentage of total state Medicaid
payments: 6.77%;
Total state DSH payments as percentage of total national DSH payments:
0.46%.
State: New Hampshire;
State DSH payments: Total state Medicaid payments[A]: $1,086;
State DSH payments: Total: $182;
State DSH payments: Federal share: $91;
Total state DSH payments as percentage of total state Medicaid
payments: 16.71%;
Total state DSH payments as percentage of total national DSH payments:
1.06%.
State: New Jersey;
State DSH payments: Total state Medicaid payments[A]: $9,109;
State DSH payments: Total: $1,288;
State DSH payments: Federal share: $644;
Total state DSH payments as percentage of total state Medicaid
payments: 14.14%;
Total state DSH payments as percentage of total national DSH payments:
7.51%.
State: New Mexico;
State DSH payments: Total state Medicaid payments[A]: $2,444;
State DSH payments: Total: $19;
State DSH payments: Federal share: $13;
Total state DSH payments as percentage of total state Medicaid
payments: 0.77%;
Total state DSH payments as percentage of total national DSH payments:
0.11%.
State: New York;
State DSH payments: Total state Medicaid payments[A]: $43,554;
State DSH payments: Total: $3,068;
State DSH payments: Federal share: $1,534;
Total state DSH payments as percentage of total state Medicaid
payments: 7.04%;
Total state DSH payments as percentage of total national DSH payments:
17.89%.
State: North Carolina;
State DSH payments: Total state Medicaid payments[A]: $8,720;
State DSH payments: Total: $461;
State DSH payments: Federal share: $293;
Total state DSH payments as percentage of total state Medicaid
payments: 5.29%;
Total state DSH payments as percentage of total national DSH payments:
2.69%.
State: North Dakota;
State DSH payments: Total state Medicaid payments[A]: $499;
State DSH payments: Total: $2;
State DSH payments: Federal share: less than $2;
Total state DSH payments as percentage of total state Medicaid
payments: 0.46%;
Total state DSH payments as percentage of total national DSH payments:
0.01%.
State: Ohio;
State DSH payments: Total state Medicaid payments[A]: $11,768;
State DSH payments: Total: $735;
State DSH payments: Federal share: $439;
Total state DSH payments as percentage of total state Medicaid
payments: 6.24%;
Total state DSH payments as percentage of total national DSH payments:
4.28%.
State: Oklahoma;
State DSH payments: Total state Medicaid payments[A]: $2,871;
State DSH payments: Total: $39;
State DSH payments: Federal share: $27;
Total state DSH payments as percentage of total state Medicaid
payments: 1.37%;
Total state DSH payments as percentage of total national DSH payments:
0.23%.
State: Oregon;
State DSH payments: Total state Medicaid payments[A]: $2,900;
State DSH payments: Total: $44;
State DSH payments: Federal share: $27;
Total state DSH payments as percentage of total state Medicaid
payments: 1.52%;
Total state DSH payments as percentage of total national DSH payments:
0.26%.
State: Pennsylvania;
State DSH payments: Total state Medicaid payments[A]: $15,402;
State DSH payments: Total: $1,019;
State DSH payments: Federal share: $560;
Total state DSH payments as percentage of total state Medicaid
payments: 6.61%;
Total state DSH payments as percentage of total national DSH payments:
5.94%.
State: Rhode Island;
State DSH payments: Total state Medicaid payments[A]: $1,674;
State DSH payments: Total: $112;
State DSH payments: Federal share: $61;
Total state DSH payments as percentage of total state Medicaid
payments: 6.72%;
Total state DSH payments as percentage of total national DSH payments:
0.66%.
State: South Carolina;
State DSH payments: Total state Medicaid payments[A]: $3,934;
State DSH payments: Total: $445;
State DSH payments: Federal share: $308;
Total state DSH payments as percentage of total state Medicaid
payments: 11.31%;
Total state DSH payments as percentage of total national DSH payments:
2.59%.
State: South Dakota;
State DSH payments: Total state Medicaid payments[A]: $602;
State DSH payments: Total: $1;
State DSH payments: Federal share: less than $1;
Total state DSH payments as percentage of total state Medicaid
payments: 0.18%;
Total state DSH payments as percentage of total national DSH payments:
0.01%.
State: Tennessee[B];
State DSH payments: Total state Medicaid payments[A]: $6,014;
State DSH payments: Total: $0;
State DSH payments: Federal share: $0;
Total state DSH payments as percentage of total state Medicaid
payments: 0.00%;
Total state DSH payments as percentage of total national DSH payments:
0.00%.
State: Texas;
State DSH payments: Total state Medicaid payments[A]: $17,684;
State DSH payments: Total: $1,543;
State DSH payments: Federal share: $936;
Total state DSH payments as percentage of total state Medicaid
payments: 8.72%;
Total state DSH payments as percentage of total national DSH payments:
9.00%.
State: Utah;
State DSH payments: Total state Medicaid payments[A]: $1,450;
State DSH payments: Total: $19;
State DSH payments: Federal share: $14;
Total state DSH payments as percentage of total state Medicaid
payments: 1.34%;
Total state DSH payments as percentage of total national DSH payments:
0.11%.
State: Vermont;
State DSH payments: Total state Medicaid payments[A]: $947;
State DSH payments: Total: $24;
State DSH payments: Federal share: $14;
Total state DSH payments as percentage of total state Medicaid
payments: 2.59%;
Total state DSH payments as percentage of total national DSH payments:
0.14%.
State: Virginia;
State DSH payments: Total state Medicaid payments[A]: $4,608;
State DSH payments: Total: $157;
State DSH payments: Federal share: $78;
Total state DSH payments as percentage of total state Medicaid
payments: 3.40%;
Total state DSH payments as percentage of total national DSH payments:
0.91%.
State: Washington;
State DSH payments: Total state Medicaid payments[A]: $5,524;
State DSH payments: Total: $304;
State DSH payments: Federal share: $152;
Total state DSH payments as percentage of total state Medicaid
payments: 5.51%;
Total state DSH payments as percentage of total national DSH payments:
1.77%.
State: West Virginia;
State DSH payments: Total state Medicaid payments[A]: $2,076;
State DSH payments: Total: $74;
State DSH payments: Federal share: $54;
Total state DSH payments as percentage of total state Medicaid
payments: 3.58%;
Total state DSH payments as percentage of total national DSH payments:
0.43%.
State: Wisconsin;
State DSH payments: Total state Medicaid payments[A]: $4,583;
State DSH payments: Total: $63;
State DSH payments: Federal share: $36;
Total state DSH payments as percentage of total state Medicaid
payments: 1.37%;
Total state DSH payments as percentage of total national DSH payments:
0.37%.
State: Wyoming;
State DSH payments: Total state Medicaid payments[A]: $418;
State DSH payments: Total: less than $1;
State DSH payments: Federal share: less than $1;
Total state DSH payments as percentage of total state Medicaid
payments: 0.12%;
Total state DSH payments as percentage of total national DSH payments:
less than 0.01%.
State: Total;
State DSH payments: Total state Medicaid payments[A]: $299,022[D];
State DSH payments: Total: $17,149[E];
State DSH payments: Federal share: $9,646[E];
Total state DSH payments as percentage of total state Medicaid
payments: 5.74%;
Total state DSH payments as percentage of total national DSH payments:
[Empty].
Source: GAO analysis of CMS-64 data as of the end of fiscal year 2006.
Note: Total DSH payments represent payments made in fiscal year 2006
and may include payments that apply to prior fiscal years.
[A] Total state Medicaid payments represents both the state and federal
share and includes all payments made by the states to providers,
including DSH and non-DSH payments. It does not include expenditures
for program administration.
[B] Hawaii and Tennessee did not have any DSH allotments in fiscal year
2006. Both states operated Medicaid demonstrations under which DSH
funding is incorporated into payments made to managed care
organizations that provide health coverage to Medicaid individuals.
However, the Tax Relief and Health Care Act of 2006, Pub. L. No. 109-
432, § 404, 120 Stat. 2922, 2995-6 (2006) (codified, as amended, at 42
U.S.C. § 1396r-4(f)(6)), established DSH allotments for both states and
allowed the states to submit changes to their state plans, which, if
approved, would authorize both states to make DSH payments and to
receive federal reimbursement for these payments in fiscal year 2007.
The Medicare, Medicaid, SCHIP Extension Act of 2007, Pub. L. No. 110-
173, § 204, 121 Stat. 2492, 2513-2514 (2007) (codified, as amended, at
42 U.S.C. § 1396r-4(f)(6)) extended the states' authority to make DSH
payments through June 2008.
[C] According to state officials, the $346 million Massachusetts
reported as DSH payments on its 2006 expenditure report were actually
non-DSH payments made under a Medicaid demonstration. Massachusetts
officials stated that these non-DSH payments were reported as DSH
payments because a form for reporting these payments had not been
created at the time the state was seeking reimbursement for them.
[D] This total includes $889 million in Medicaid payments made by
Puerto Rico and four U.S. territories. Puerto Rico and the four U.S.
territories did not make any DSH payments in 2006.
[E] Payment amounts may not add to total because of rounding.
[End of table]
Table 6: State Non-DSH Payments Made in Fiscal Year 2006 as a
Percentage of Total State Medicaid Payments, Ranked Alphabetically by
State (Dollars in millions):
State: Alabama;
Total state Medicaid payments[A]: $3,860;
State non-DSH supplemental payments: Total: $275;
State non-DSH supplemental payments: Federal share: $191;
Total state non-DSH payments as percentage of total state Medicaid
payments: 7.12%.
State: Alaska;
Total state Medicaid payments[A]: $945;
State non-DSH supplemental payments: Total: $30;
State non-DSH supplemental payments: Federal share: $18;
Total state non-DSH payments as percentage of total state Medicaid
payments: 3.22.
State: Arizona;
Total state Medicaid payments[A]: $6,189;
State non-DSH supplemental payments: Total: [Empty];
State non-DSH supplemental payments: Federal share: [Empty];
Total state non-DSH payments as percentage of total state Medicaid
payments: [Empty].
State: Arkansas;
Total state Medicaid payments[A]: $2,854;
State non-DSH supplemental payments: Total: $63;
State non-DSH supplemental payments: Federal share: $47;
Total state non-DSH payments as percentage of total state Medicaid
payments: 2.22.
State: California;
Total state Medicaid payments[A]: $33,840;
State non-DSH supplemental payments: Total: $1,024;
State non-DSH supplemental payments: Federal share: $512;
Total state non-DSH payments as percentage of total state Medicaid
payments: 3.02.
State: Colorado;
Total state Medicaid payments[A]: $2,850;
State non-DSH supplemental payments: Total: $140;
State non-DSH supplemental payments: Federal share: $70;
Total state non-DSH payments as percentage of total state Medicaid
payments: 4.90.
State: Connecticut;
Total state Medicaid payments[A]: $4,068;
State non-DSH supplemental payments: Total: [Empty];
State non-DSH supplemental payments: Federal share: [Empty];
Total state non-DSH payments as percentage of total state Medicaid
payments: [Empty].
State: Delaware;
Total state Medicaid payments[A]: $946;
State non-DSH supplemental payments: Total: [Empty];
State non-DSH supplemental payments: Federal share: [Empty];
Total state non-DSH payments as percentage of total state Medicaid
payments: [Empty].
State: District of Columbia;
Total state Medicaid payments[A]: $1,285;
State non-DSH supplemental payments: Total: [Empty];
State non-DSH supplemental payments: Federal share: [Empty];
Total state non-DSH payments as percentage of total state Medicaid
payments: [Empty].
State: Florida;
Total state Medicaid payments[A]: $12,621;
State non-DSH supplemental payments: Total: $681;
State non-DSH supplemental payments: Federal share: $401;
Total state non-DSH payments as percentage of total state Medicaid
payments: 5.39.
State: Georgia;
Total state Medicaid payments[A]: $6,480;
State non-DSH supplemental payments: Total: $332;
State non-DSH supplemental payments: Federal share: $201;
Total state non-DSH payments as percentage of total state Medicaid
payments: 5.13.
State: Hawaii;
Total state Medicaid payments[A]: $1,091;
State non-DSH supplemental payments: Total: $18;
State non-DSH supplemental payments: Federal share: $11;
Total state non-DSH payments as percentage of total state Medicaid
payments: 1.69.
State: Idaho;
Total state Medicaid payments[A]: $1,027;
State non-DSH supplemental payments: Total: [Empty];
State non-DSH supplemental payments: Federal share: [Empty];
Total state non-DSH payments as percentage of total state Medicaid
payments: [Empty].
State: Illinois;
Total state Medicaid payments[A]: $9,967;
State non-DSH supplemental payments: Total: $631;
State non-DSH supplemental payments: Federal share: $317;
Total state non-DSH payments as percentage of total state Medicaid
payments: 6.33.
State: Indiana;
Total state Medicaid payments[A]: $5,637;
State non-DSH supplemental payments: Total: [Empty];
State non-DSH supplemental payments: Federal share: [Empty];
Total state non-DSH payments as percentage of total state Medicaid
payments: [Empty].
State: Iowa;
Total state Medicaid payments[A]: $2,539;
State non-DSH supplemental payments: Total: [Empty];
State non-DSH supplemental payments: Federal share: [Empty];
Total state non-DSH payments as percentage of total state Medicaid
payments: [Empty].
State: Kansas;
Total state Medicaid payments[A]: $2,057;
State non-DSH supplemental payments: Total: [Empty];
State non-DSH supplemental payments: Federal share: [Empty];
Total state non-DSH payments as percentage of total state Medicaid
payments: [Empty].
State: Kentucky;
Total state Medicaid payments[A]: $4,329;
State non-DSH supplemental payments: Total: [Empty];
State non-DSH supplemental payments: Federal share: [Empty];
Total state non-DSH payments as percentage of total state Medicaid
payments: [Empty].
State: Louisiana;
Total state Medicaid payments[A]: $4,688;
State non-DSH supplemental payments: Total: $31;
State non-DSH supplemental payments: Federal share: $22;
Total state non-DSH payments as percentage of total state Medicaid
payments: 0.67.
State: Maine;
Total state Medicaid payments[A]: $1,897;
State non-DSH supplemental payments: Total: [Empty];
State non-DSH supplemental payments: Federal share: [Empty];
Total state non-DSH payments as percentage of total state Medicaid
payments: [Empty].
State: Maryland;
Total state Medicaid payments[A]: $4,916;
State non-DSH supplemental payments: Total: [Empty];
State non-DSH supplemental payments: Federal share: [Empty];
Total state non-DSH payments as percentage of total state Medicaid
payments: [Empty].
State: Massachusetts;
Total state Medicaid payments[A]: $9,561;
State non-DSH supplemental payments: Total: [Empty];
State non-DSH supplemental payments: Federal share: [Empty];
Total state non-DSH payments as percentage of total state Medicaid
payments: [Empty].
State: Michigan;
Total state Medicaid payments[A]: $8,237;
State non-DSH supplemental payments: Total: $13;
State non-DSH supplemental payments: Federal share: $7;
Total state non-DSH payments as percentage of total state Medicaid
payments: 0.16.
State: Minnesota;
Total state Medicaid payments[A]: $5,367;
State non-DSH supplemental payments: Total: [Empty];
State non-DSH supplemental payments: Federal share: [Empty];
Total state non-DSH payments as percentage of total state Medicaid
payments: [Empty].
State: Mississippi;
Total state Medicaid payments[A]: $3,240;
State non-DSH supplemental payments: Total: $175;
State non-DSH supplemental payments: Federal share: $133;
Total state non-DSH payments as percentage of total state Medicaid
payments: 5.39.
State: Missouri;
Total state Medicaid payments[A]: $6,382;
State non-DSH supplemental payments: Total: $116;
State non-DSH supplemental payments: Federal share: $72;
Total state non-DSH payments as percentage of total state Medicaid
payments: 1.83.
State: Montana;
Total state Medicaid payments[A]: $720;
State non-DSH supplemental payments: Total: $33;
State non-DSH supplemental payments: Federal share: $24;
Total state non-DSH payments as percentage of total state Medicaid
payments: 4.65.
State: Nebraska;
Total state Medicaid payments[A]: $1,499;
State non-DSH supplemental payments: Total: $48;
State non-DSH supplemental payments: Federal share: $29;
Total state non-DSH payments as percentage of total state Medicaid
payments: 3.20.
State: Nevada;
Total state Medicaid payments[A]: $1,175;
State non-DSH supplemental payments: Total: [Empty];
State non-DSH supplemental payments: Federal share: [Empty];
Total state non-DSH payments as percentage of total state Medicaid
payments: [Empty].
State: New Hampshire;
Total state Medicaid payments[A]: $1,086;
State non-DSH supplemental payments: Total: $19;
State non-DSH supplemental payments: Federal share: $10;
Total state non-DSH payments as percentage of total state Medicaid
payments: 1.76.
State: New Jersey;
Total state Medicaid payments[A]: $9,109;
State non-DSH supplemental payments: Total: [Empty];
State non-DSH supplemental payments: Federal share: [Empty];
Total state non-DSH payments as percentage of total state Medicaid
payments: [Empty].
State: New Mexico;
Total state Medicaid payments[A]: $2,444;
State non-DSH supplemental payments: Total: $49;
State non-DSH supplemental payments: Federal share: $35;
Total state non-DSH payments as percentage of total state Medicaid
payments: 2.01.
State: New York;
Total state Medicaid payments[A]: $43,554;
State non-DSH supplemental payments: Total: $385;
State non-DSH supplemental payments: Federal share: $192;
Total state non-DSH payments as percentage of total state Medicaid
payments: 0.88.
State: North Carolina;
Total state Medicaid payments[A]: $8,720;
State non-DSH supplemental payments: Total: $825;
State non-DSH supplemental payments: Federal share: $524;
Total state non-DSH payments as percentage of total state Medicaid
payments: 9.46.
State: North Dakota;
Total state Medicaid payments[A]: $499;
State non-DSH supplemental payments: Total: [Empty];
State non-DSH supplemental payments: Federal share: [Empty];
Total state non-DSH payments as percentage of total state Medicaid
payments: [Empty].
State: Ohio;
Total state Medicaid payments[A]: $11,768;
State non-DSH supplemental payments: Total: $46;
State non-DSH supplemental payments: Federal share: $27;
Total state non-DSH payments as percentage of total state Medicaid
payments: 0.39.
State: Oklahoma;
Total state Medicaid payments[A]: $2,871;
State non-DSH supplemental payments: Total: $28;
State non-DSH supplemental payments: Federal share: $19;
Total state non-DSH payments as percentage of total state Medicaid
payments: 0.99.
State: Oregon;
Total state Medicaid payments[A]: $2,900;
State non-DSH supplemental payments: Total: $15;
State non-DSH supplemental payments: Federal share: $9;
Total state non-DSH payments as percentage of total state Medicaid
payments: 0.51.
State: Pennsylvania;
Total state Medicaid payments[A]: $15,402;
State non-DSH supplemental payments: Total: [Empty];
State non-DSH supplemental payments: Federal share: [Empty];
Total state non-DSH payments as percentage of total state Medicaid
payments: [Empty].
State: Rhode Island;
Total state Medicaid payments[A]: $1,674;
State non-DSH supplemental payments: Total: [Empty];
State non-DSH supplemental payments: Federal share: [Empty];
Total state non-DSH payments as percentage of total state Medicaid
payments: [Empty].
State: South Carolina;
Total state Medicaid payments[A]: $3,934;
State non-DSH supplemental payments: Total: $335;
State non-DSH supplemental payments: Federal share: $232;
Total state non-DSH payments as percentage of total state Medicaid
payments: 8.51.
State: South Dakota;
Total state Medicaid payments[A]: $602;
State non-DSH supplemental payments: Total: [Empty];
State non-DSH supplemental payments: Federal share: [Empty];
Total state non-DSH payments as percentage of total state Medicaid
payments: [Empty]-.
State: Tennessee;
Total state Medicaid payments[A]: $6,014;
State non-DSH supplemental payments: Total: $127;
State non-DSH supplemental payments: Federal share: $81;
Total state non-DSH payments as percentage of total state Medicaid
payments: 2.10.
State: Texas;
Total state Medicaid payments[A]: $17,684;
State non-DSH supplemental payments: Total: $818;
State non-DSH supplemental payments: Federal share: $496;
Total state non-DSH payments as percentage of total state Medicaid
payments: 4.63.
State: Utah;
Total state Medicaid payments[A]: $1,450;
State non-DSH supplemental payments: Total: [Empty];
State non-DSH supplemental payments: Federal share: [Empty];
Total state non-DSH payments as percentage of total state Medicaid
payments: [Empty].
State: Vermont;
Total state Medicaid payments[A]: $947;
State non-DSH supplemental payments: Total: [Empty];
State non-DSH supplemental payments: Federal share: [Empty];
Total state non-DSH payments as percentage of total state Medicaid
payments: [Empty].
State: Virginia;
Total state Medicaid payments[A]: $4,608;
State non-DSH supplemental payments: Total: [Empty];
State non-DSH supplemental payments: Federal share: [Empty];
Total state non-DSH payments as percentage of total state Medicaid
payments: [Empty].
State: Washington;
Total state Medicaid payments[A]: $5,524;
State non-DSH supplemental payments: Total: $9;
State non-DSH supplemental payments: Federal share: $5;
Total state non-DSH payments as percentage of total state Medicaid
payments: 0.17.
State: West Virginia;
Total state Medicaid payments[A]: $2,076;
State non-DSH supplemental payments: Total: $36;
State non-DSH supplemental payments: Federal share: $26;
Total state non-DSH payments as percentage of total state Medicaid
payments: 1.72.
State: Wisconsin;
Total state Medicaid payments[A]: $4,583;
State non-DSH supplemental payments: Total:$29;
State non-DSH supplemental payments: Federal share: $16;
Total state non-DSH payments as percentage of total state Medicaid
payments: 0.62.
State: Wyoming;
Total state Medicaid payments[A]: $418;
State non-DSH supplemental payments: Total: [Empty];
State non-DSH supplemental payments: Federal share: [Empty];
Total state non-DSH payments as percentage of total state Medicaid
payments: [Empty].
State: Total;
Total state Medicaid payments[A]: $299,022[B];
State non-DSH supplemental payments: Total: $6,332[C];
State non-DSH supplemental payments: Federal share: $3,725[C];
Total state non-DSH payments as percentage of total state Medicaid
payments: 2.12%.
Source: GAO analysis of CMS 64.9I forms.
Notes: This table includes data from CMS 64.9I forms as adjusted as of
October 5, 2007.
A dash in a cell indicates that we were unable to distinguish whether
the state did not submit information on the CMS 64.9I form, which is
part of the CMS-64 expenditure report, or did submit the CMS 64.9I form
but reported that the state made no non-DSH payments in 2006.
We found evidence that CMS 64.9I forms do not fully capture the non-DSH
payments made by states. The CMS 64.9I form is an informational form
and is not used for reimbursement purposes.
[A] Total state Medicaid payments represents both the state and federal
share and includes all payments made by the states to providers,
including DSH and non-DSH payments. It does not include expenditures
for program administration.
[B] This total includes $889 million in Medicaid payments made by
Puerto Rico and four U.S. territories.
[C] Payment amounts may not add to total because of rounding.
[End of table]
[End of section]
Appendix III: Summary of Medicaid Supplemental Payment Programs in Five
Surveyed States:
We obtained information from each of the five states we surveyed on the
supplemental payment programs they had in place in fiscal year 2006. We
asked the states to provide information about each supplemental payment
program they operated, including:
* the program's purpose;
* the providers that received payments and the amount of payment they
received; and:
* whether payments were made as lump-sum payments (for example, as a
quarterly or annual payment made to a provider) or as an enhanced
payment rate (an additional amount that is added to the individual
payments made to providers for specific services).
The five states reported making all payments in fiscal year 2006 as
periodic lump sums. The purpose, number of providers receiving
payments, and total payments made for each program are summarized in
tables 7 through 11.
California's Fiscal Year 2006 Supplemental Payment Programs:
California officials reported that in fiscal year 2006 the state paid
nearly $4 billion in Medicaid supplemental payments through three DSH
and nine non-DSH supplemental payment programs. Supplemental payments
were made to hospitals and nursing facilities. Total payments through
the programs ranged from $11 million to over $2 billion for DSH
programs and from $8 million to over $1 billion for non-DSH programs.
See table 7 for a description of each supplemental payment program
administered by California.
Table 7: California Supplemental Payment Programs from Which Payments
Were Made in Fiscal Year 2006, as Reported to GAO by the State in
January 2008 (Dollars in millions):
Program type: DSH;
Program name: DSH Program for Designated Public Hospitals;
Program purpose as reported by the state: Provides supplemental
reimbursement to Designated Public Hospitals that serve a
disproportionate number of MediCal (Medicaid), indigent, and uninsured
patients. The primary goal of the supplemental payments is to maintain
access to health care for this population;
Number of providers receiving payments in FY 2006: 23;
Payment amount[A]: $2,051.
Program type: DSH;
Program name: DSH Program for Non-Designated Public Hospitals;
Program purpose as reported by the state: Provides supplemental
reimbursement to Non-Designated Public Hospitals that serve a
disproportionate number of MediCal, indigent, and uninsured patients.
The primary goal of the supplemental payments is to maintain access to
health care for this population;
Number of providers receiving payments in FY 2006: 30;
Payment amount[A]: $11.
Program type: DSH;
Program name: DSH Payments Made Under Former Methodology;
Program purpose as reported by the state: This program provides
supplemental reimbursement to Public and Private hospitals that serve a
disproportionate number of MediCal, indigent and uninsured patients.
Primary goal of the supplemental payments is to maintain access to
health care for this population;
Number of providers receiving payments in FY 2006: 155;
Payment amount[A]: $285.
Program type: DSH;
Program name: Total DSH;
Number of providers receiving payments in FY 2006: 159[B];
Payment amount[A]: $2,347.
Program type: Non-DSH;
Program name: Safety Net Care Pool[C];
Program purpose as reported by the state: Provides supplemental
reimbursement to Designated Public Hospitals for uncompensated hospital
and clinic costs associated with health care services provided to the
uninsured;
Number of providers receiving payments in FY 2006: 22;
Payment amount[A]: $801.
Program type: Non-DSH;
Program name: DSH Replacement Payments for Private Hospitals[D];
Program purpose as reported by the state: Provides supplemental
reimbursement to private hospitals that serve a disproportionate number
of MediCal, indigent, and uninsured patients. Primary goal of the
supplemental payments is to maintain access to health care for this
population;
Number of providers receiving payments in FY 2006: 99;
Payment amount[A]: $363.
Program type: Non-DSH;
Program name: Public Hospital Outpatient Supplemental Reimbursement
Program;
Program purpose as reported by the state: Provides supplemental
reimbursement for an outpatient department of a general acute care
hospital that is owned by a city, county, city and county, the
University of California, or health care district that meets specified
requirements and provides hospital services to MediCal beneficiaries;
Number of providers receiving payments in FY 2006: 70;
Payment amount[A]: $209.
Program type: Non-DSH;
Program name: Construction Renovation Reimbursement Program[C];
Program purpose as reported by the state: Provides partial
reimbursement of the debt service incurred on revenue bonds for the
construction, renovation, replacement, or retrofitting of eligible
hospitals and/or their ancillary or fixed equipment used to provide
services to MediCal beneficiaries;
Number of providers receiving payments in FY 2006: 15;
Payment amount[A]: $87.
Program type: Non-DSH;
Program name: Enhanced Payments to Private Trauma Hospitals;
Program purpose as reported by the state: Provides enhanced MediCal
payments for outpatient hospital trauma and emergency services to
private hospitals within Los Angeles County and Alameda County that
have demonstrated a need for assistance in ensuring the availability of
essential trauma services for MediCal beneficiaries;
Number of providers receiving payments in FY 2006: 11;
Payment amount[A]: $39.
Program type: Non-DSH;
Program name: Distressed Hospital Fund[C];
Program purpose as reported by the state: Provides supplemental
payments to hospitals participating in the Selective Provider
Contracting Program. Contract hospitals that meet the requirements as
determined by California Medical Assistance Commission are invited
annually to submit proposals for disbursements from the Distressed
Hospital Fund per Welfare and Institutions Code, Section 14166, et seq;
Number of providers receiving payments in FY 2006: 11;
Payment amount[A]: $24.
Program type: Non-DSH;
Program name: Distinct Part/Nursing Facility Supplemental Payment
Program;
Program purpose as reported by the state: Provides supplemental
reimbursement for a Distinct Part/Nursing Facility of a general acute
care hospital that is owned or operated by a city, county, city and
county, or health care district; to provide services to MediCal
(Medicaid) beneficiaries;
Number of providers receiving payments in FY 2006: 19;
Payment amount[A]: $12.
Program type: Non-DSH;
Program name: Outpatient DSH Payment Program[D];
Program purpose as reported by the state: Dollars in millions: Provides
enhanced reimbursement to eligible acute care hospitals for outpatient
services that serve a disproportionate number of MediCal (Medicaid),
indigent, and uninsured patients. The primary goal of the supplemental
payments is to maintain outpatient access to health care for this
population;
Number of providers receiving payments in FY 2006: 111;
Payment amount[A]: 10.
Program type: Non-DSH;
Program name: Small and Rural Hospital Payment Program;
Program purpose as reported by the state: Dollars in millions: Provides
an increase to the reimbursements for outpatient services rendered to a
disproportionate number of MediCal (Medicaid), indigent, and uninsured
patients by small and rural hospitals;
Number of providers receiving payments in FY 2006: 71;
Payment amount[A]: $8.
Program type: Non-DSH;
Program name: Total non-DSH;
Number of providers receiving payments in FY 2006: 261[B];
Payment amount[A]: $1,554.
Total supplemental:
Number of providers receiving payments in FY 2006: 272[B];
Payment amount[A]: $3,900.
Source: GAO analysis of survey responses from California.
[A] Payment amounts may not sum to totals because of rounding.
[B] Some providers received payments from multiple programs; totals
represent numbers of unique providers that received payments.
[C] Program was authorized under a Medicaid demonstration.
[D] Although the name of this program contains the term DSH, we
considered it to be a non-DSH program because payments were not counted
against the state's DSH allotment.
[End of table]
Massachusetts's Fiscal Year 2006 Supplemental Payment Programs:
Massachusetts officials reported that in fiscal year 2006 the state
paid over $1.6 billion in Medicaid supplemental payments through 15 non-
DSH supplemental payment programs. Supplemental payments were made to
hospitals, including psychiatric hospitals; managed care organizations;
and a physician group. Four programs were in operation for only part of
2006: two of these programs were terminated at the end of the third
quarter of fiscal year 2006 and two began at the start of the fourth
quarter. On January 26, 2005, CMS approved a 3-year extension to the
Medicaid demonstration in Massachusetts, the MassHealth demonstration.
The demonstration, which was in effect during fiscal year 2006, created
a Safety Net Care Pool, which represents the combined total of what
Massachusetts had previously spent on DSH programs and supplemental
payments to Medicaid managed care organizations. The state funded 10
non-DSH supplemental payment programs through the Safety Net Care Pool,
some of which had been DSH programs prior to their inclusion in the
demonstration. In addition to supplemental payments, Massachusetts
funded its Commonwealth Care Health Insurance Program through the Pool.
Under Commonwealth Care, the state provides premium assistance
subsidies to private managed care organizations for providing sliding
scale health insurance to previously uninsured people with low incomes
and is part of the state's transition from supplemental payments to
providers to expanding coverage of individuals. See table 8 for a
description of each supplemental payment program administered by
Massachusetts.
Table 8: Massachusetts Supplemental Payment Programs from Which
Payments Were Made in Fiscal Year 2006, as Reported to GAO by the State
in January 2008 (Dollars in millions):
Program type: DSH;
Program name: None reported;
Program purpose as reported by the state: NA;
Number of providers receiving payments in FY 2006: [Empty];
Payment amount[A]: [Empty].
Total DSH:
Number of providers receiving payments in FY 2006: 0;
Payment amount[A]: $0.
Program type: Non-DSH;
Program name: Supplemental Payments for Managed Care Organizations
(ended on June 30, 2006)[B];
Program purpose as reported by the state: To support the transition of
safety net health systems from providing unmanaged services to the
uninsured to providing managed care services to individuals newly
eligible for Medicaid as a result of an expansion of Massachusetts's
Medicaid program under the authority of a Medicaid demonstration;
Number of providers receiving payments in FY 2006: 2;
Payment amount[A]: $577.
Program type: Non-DSH;
Program name: Uncompensated Care Safety Net Care Payment[B];
Program purpose as reported by the state: For acute hospitals that
incur uncompensated costs for services to low-income patients;
Number of providers receiving payments in FY 2006: 57;
Payment amount[A]: $225.
Program type: Non-DSH;
Program name: Essential MassHealth Hospital rate payment;
Program purpose as reported by the state: For hospitals that are deemed
to be essential to the MassHealth program in that they are
legislatively mandated to have a public mission;
Number of providers receiving payments in FY 2006: 6;
Payment amount[A]: $209.
Program type: Non-DSH;
Program name: Public Service Hospital Safety Net Care Payment[B];
Program purpose as reported by the state: For safety net acute
hospitals that have significant free care charges and a
disproportionately public payer mix;
Number of providers receiving payments in FY 2006: 2;
Payment amount[A]: $177.
Program type: Non-DSH;
Program name: Public Service Hospital rate payment;
Program purpose as reported by the state: For safety net acute
hospitals that have significant free care charges and a
disproportionately public payer mix;
Number of providers receiving payments in FY 2006: 1;
Payment amount[A]: $124.
Program type: Non-DSH;
Program name: Safety Net Care Payments for State-Owned Non-Acute
Hospitals Operated by the Department of Mental Health[B];
Program purpose as reported by the state: For unreimbursed nonacute
hospital services provided by hospitals operated by the Massachusetts
Department of Mental Health;
Number of providers receiving payments in FY 2006: 8;
Payment amount[A]: $105.
Program type: Non-DSH;
Program name: Acute Hospitals with High Medicaid Discharges;
Program purpose as reported by the state: For acute hospitals that
serve a substantial share of the Medicaid population;
Number of providers receiving payments in FY 2006: 9;
Payment amount[A]: $88.
Program type: Non-DSH;
Program name: Section 122 of Chapter 58 Safety Net Health System
payments (began on July 1, 2006)[B];
Program purpose as reported by the state: For unreimbursed free care
and Medicaid services, including Medicaid managed care services and
Commonwealth Care, and the operation of the safety net health systems
at the two publicly operated or public-service state-defined
disproportionate share hospitals with the highest relative volume of
uncompensated care costs in hospital fiscal year 2007;
Number of providers receiving payments in FY 2006: 2;
Payment amount[A]: $50.
Program type: Non-DSH;
Program name: Safety Net Care Payments for Special Population State-
Owned Non-Acute Hospitals Operated by the Department of Public
Health[B];
Program purpose as reported by the state: For unreimbursed nonacute
hospital services provided by hospitals operated by the Massachusetts
Department of Public Health;
Number of providers receiving payments in FY 2006: 4;
Payment amount[A]: $30.
Program type: Non-DSH;
Program name: Physician Supplemental Payment;
Program purpose as reported by the state: For the physician group that
exists to support the mission of the teaching hospital affiliated with
the Commonwealth-owned medical school;
Number of providers receiving payments in FY 2006: 1;
Payment amount[A]: $19.
Program type: Non-DSH;
Program name: Safety Net Care Payments for Pediatric Specialty
Hospitals and Hospitals with Pediatric Specialty Units[B];
Program purpose as reported by the state: Recognizes the unique
population and/or the acute severity of illness within the case mix
seen by pediatric specialty hospitals and hospitals with pediatric
specialty units;
Number of providers receiving payments in FY 2006: 4;
Payment amount[A]: $12.
Program type: Non-DSH;
Program name: High Public Payer Hospital Safety Net Care Payment[B];
Program purpose as reported by the state: For acute hospitals that have
the highest percentages of revenue from Medicare, Medicaid, other
government payers, and free care, relative to total revenue;
Number of providers receiving payments in FY 2006: 6;
Payment amount[A]: $12.
Program type: Non-DSH;
Program name: Supplemental Medicaid Rate for Pediatric Specialty
Hospitals;
Program purpose as reported by the state: For the unique population and
the acute severity of illness within the case mix seen by pediatric
specialty hospitals;
Number of providers receiving payments in FY 2006: 1;
Payment amount[A]: $6.
Program type: Non-DSH;
Program name: Safety Net Care Payments for Pediatric Non-Acute
Hospitals (began on July 1, 2006)[B];
Program purpose as reported by the state: For the unique population and
the acute severity of illness within the case mix seen by pediatric
nonacute hospitals;
Number of providers receiving payments in FY 2006: 1;
Payment amount[A]: $1.
Program type: Non-DSH;
Program name: Basic Safety Net Care Payment (ended on June 30,
2006)[B];
Program purpose as reported by the state: For acute hospitals that have
a disproportionate amount of inpatient Medicaid days or low-income
utilization;
Number of providers receiving payments in FY 2006: 6;
Payment amount[A]: $0.
Total non-DSH:
Number of providers receiving payments in FY 2006: 82[C];
Payment amount[A]: $1,634.
Total supplemental:
Number of providers receiving payments in FY 2006: 82;
Payment amount[A]: $1,634.
Source: GAO analysis of survey responses from Massachusetts.
Note: NA = not applicable.
[A] Payment amounts may not sum to totals because of rounding; dollar
amounts less than $500,000 were rounded to zero.
[B] Program was authorized under a Medicaid demonstration.
[C] Some providers received payments from multiple programs; totals
represent numbers of unique providers that received payments.
[End of table]
Michigan's Fiscal Year 2006 Supplemental Payment Programs:
Michigan officials reported that in fiscal year 2006 the state paid
over $1 billion in Medicaid supplemental payments through six DSH and
five non-DSH supplemental payment programs. The state made supplemental
payments to hospitals, including psychiatric hospitals; nursing
facilities; clinics; and physician groups. See table 9 for a
description of each supplemental payment program administered by
Michigan.
Table 9: Michigan Supplemental Payment Programs from Which Payments
Were Made in Fiscal Year 2006, as Reported to GAO by the State in
January 2008 (Dollars in millions):
Program type: DSH;
Program name: Indigent Care Agreements DSH Pool;
Program purpose as reported by the state: To provide health care
services to low-income patients with special needs who are not covered
under other public or private health care programs;
Number of providers receiving payments in FY 2006: 51;
Payment amount[A]: $158.
Program type: DSH;
Program name: Institute for Mental Disease DSH Pool;
Program purpose as reported by the state: Dollars in millions: To
ensure access to services for indigent persons with serious mental
illness requiring inpatient treatment;
Number of providers receiving payments in FY 2006: 5;
Payment amount[A]: $142.
Program type: DSH;
Program name: Government Provider DSH Pool;
Program purpose as reported by the state: To ensure funding for costs
incurred by public facilities providing inpatient hospital services
that serve a disproportionate number of low-income patients with
special needs;
Number of providers receiving payments in FY 2006: 18;
Payment amount[A]: $74.
Program type: DSH;
Program name: $45 Million DSH Pool;
Program purpose as reported by the state: To provide health care
services to low-income patients with special needs who are not covered
under other public or private health care programs. Payments are
distributed to hospitals with a high proportion of indigent care based
on their percentage of inpatient indigent charges to their total
inpatient charges;
Number of providers receiving payments in FY 2006: 57;
Payment amount[A]: $45.
Program type: DSH;
Program name: $5 Million Small Hospital DSH Pool;
Program purpose as reported by the state: To ensure DSH funding for
hospitals and hospital systems that received less than $900,000 in
state fiscal year 2004 from the $45 million DSH pool;
Number of providers receiving payments in FY 2006: 106;
Payment amount[A]: $5.
Program type: DSH;
Program name: University with College of Allopathic and Osteopathic
Medicine DSH Pool;
Program purpose as reported by the state: To ensure continued access to
medical care for indigents and to increase the efficiency and
effectiveness of medical practitioners providing services to Medicaid
beneficiaries under managed care;
Number of providers receiving payments in FY 2006: 1;
Payment amount[A]: $3.
Total DSH:
Number of providers receiving payments in FY 2006: 127[B];
Payment amount[A]: $427.
Program type: Non-DSH;
Program name: Hospital UPL;
Program purpose as reported by the state: To ensure continued access by
Medicaid beneficiaries to high-quality hospital care;
Number of providers receiving payments in FY 2006: 145;
Payment amount[A]: $432.
Program type: Non-DSH;
Program name: Nursing Home UPL;
Program purpose as reported by the state:
To ensure continued access by Medicaid beneficiaries to high-quality
nursing home care;
Number of providers receiving payments in FY 2006: 415;
Payment amount[A]: $281.
Program type: Non-DSH;
Program name: Public Physician UPL;
Program purpose as reported by the state: To encourage providers to
make available to Medicaid recipients the most advanced forms of
medical diagnostic and treatment services that are uniquely available
through the technological and research capabilities of university-based
medical service systems;
Number of providers receiving payments in FY 2006: 49;
Payment amount[A]: $34.
Program type: Non-DSH;
Program name: Public Health Clinic Reimbursement;
Program purpose as reported by the state: To reimburse public health
clinics for their cost of providing services to Medicaid beneficiaries;
Number of providers receiving payments in FY 2006: 40;
Payment amount[A]: $14.
Program type: Non-DSH;
Program name: Public Dental Clinic Reimbursement;
Program purpose as reported by the state: To reimburse public dental
clinics for their cost of providing services to Medicaid beneficiaries;
Number of providers receiving payments in FY 2006: 4;
Payment amount[A]: $5.
Total non-DSH:
Number of providers receiving payments in FY 2006: 647[B];
Payment amount[A]: $766.
Total supplemental:
Number of providers receiving payments in FY 2006: 660[B];
Payment amount[A]: $1,193.
Source: GAO analysis of survey responses from Michigan.
[A] Payment amounts may not sum to totals because of rounding.
[B] Some providers received payments from multiple programs; totals
represent numbers of unique providers that received payments.
[End of table]
New York's Fiscal Year 2006 Supplemental Payment Programs:
New York officials reported that in fiscal year 2006 the state paid
over $3 billion in Medicaid supplemental payments through five DSH and
two non-DSH supplemental payment programs. Supplemental payments were
made to hospitals, including psychiatric hospitals, and nursing
facilities. See table 10 for a description of each supplemental payment
program administered by New York.
Table 10: New York Supplemental Payment Programs from Which Payments
Were Made in Fiscal Year 2006, as Reported to GAO by the State in
January 2008 (Dollars in millions):
Program type: DSH;
Program name: DSH Public Hospital DSH Cap Subsidy;
Program purpose as reported by the state: Payments provide subsidies to
hospitals for indigent care costs;
Number of providers receiving payments in FY 2006: 18;
Payment amount[A]: $1,026.
Program type: DSH;
Program name: DSH Indigent Care High Need Pool;
Program purpose as reported by the state: Payments provide subsidies to
hospitals for indigent care costs;
Number of providers receiving payments in FY 2006: 194;
Payment amount[A]: $848.
Program type: DSH;
Program name: DSH Office of Mental Health Subsidy;
Program purpose as reported by the state: Payments provide subsidies to
hospitals for indigent care costs;
Number of providers receiving payments in FY 2006: 25;
Payment amount[A]: $605.
Program type: DSH;
Program name: DSH Indigent Care Adjustment;
Program purpose as reported by the state:
Payments provide subsidies to hospitals for indigent care costs;
Number of providers receiving payments in FY 2006: 15;
Payment amount[A]: $489.
Program type: DSH;
Program name: DSH Office of Mental Health/Office of Alcoholism and
Substance Abuse Services Subsidies;
Program purpose as reported by the state: Payments provide subsidies to
hospitals for indigent care costs;
Number of providers receiving payments in FY 2006: 61;
Payment amount[A]: $61.
Total DSH:
Number of providers receiving payments in FY 2006: 222[B];
Payment amount[A]: $3,028.
Program type: Non-DSH;
Program name: Inpatient Hospital UPL;
Program purpose as reported by the state: Payments provide additional
revenue to critical safety net hospitals;
Number of providers receiving payments in FY 2006: 2;
Payment amount[A]: $385.
Program type: Non-DSH;
Program name: Nursing Home UPL;
Program purpose as reported by the state: Payments provide additional
revenue to critical safety net nursing facilities;
Number of providers receiving payments in FY 2006: 46;
Payment amount[A]: $36.
Total non-DSH:
Number of providers receiving payments in FY 2006: 48;
Payment amount[A]: $421.
Total supplemental:
Number of providers receiving payments in FY 2006: 270;
Payment amount[A]: $3,449.
Source: GAO analysis of survey responses from New York.
[A] Payment amounts may not sum to totals because of rounding.
[B] Some providers received payments from multiple programs; totals
represent numbers of unique providers that received payments.
[End of table]
Texas's Fiscal Year 2006 Supplemental Payment Programs:
Texas officials reported that in fiscal year 2006 the state paid over
$2 billion in Medicaid supplemental payments through one DSH and two
non-DSH supplemental payment programs. Supplemental payments were made
only to hospitals. See table 11 for a description of each supplemental
payment program administered by Texas.
Table 11: Texas Supplemental Payment Programs from Which Payments were
Made in Fiscal Year 2006, as Reported to GAO by the State in January
2008 (Dollars in millions):
Program type: DSH;
Program name: Disproportionate Share Hospital;
Program purpose as reported by the state: Reimburses hospitals that
provide a disproportionate amount of inpatient care to indigent
patients;
Number of providers receiving payments in FY 2006: 187;
Total payments[A]: $1,549.
Total DSH:
Number of providers receiving payments in FY 2006: 187;
Total payments[A]: $1,549.
Program type: Non-DSH;
Program name: Large Urban Public Hospital;
Program purpose as reported by the state: To make supplemental payments
to most of the largest Medicaid hospital providers in Texas;
Number of providers receiving payments in FY 2006: 11;
Total payments[A]: $474.
Program type: Non-DSH;
Program name: Rural Hospital;
Program purpose as reported by the state:
To make supplemental Medicaid payments to rural hospitals in Texas;
Number of providers receiving payments in FY 2006: 111;
Total payments[A]: $56.
Total non-DSH:
Number of providers receiving payments in FY 2006: 122;
Total payments[A]: $530.
Total supplemental:
Number of providers receiving payments in FY 2006: 247[B];
Total payments[A]: $2,079.
Source: GAO analysis of survey responses from Texas.
[A] Payment amounts may not sum to totals because of rounding.
[B] Some providers receive payments from multiple programs; totals
represent numbers of unique providers receiving payments.
[End of table]
[End of section]
Appendix IV: Distribution of Medicaid Supplemental Payments, by
Provider Type and Ownership, in Five Surveyed States:
Officials from the five surveyed states reported making DSH and non-DSH
supplemental payments in fiscal year 2006 to a variety of provider
types (such as hospitals, nursing facilities, or physician groups) and
provider ownership categories (state government, local government, or
private). In fiscal year 2006, in total, the five states reported
making $10.4 billion in payments to hospitals (85 percent of total
payments), $852 million to psychiatric hospitals (7 percent), $577
million to managed care organizations (5 percent), $329 million to
nursing facilities (3 percent), $53 million to physician groups (less
than 1 percent), and $19 million to clinics (less than 1 percent). The
five states made most payments (57 percent) to local government
providers; payments to providers they categorized as owned by state
governments accounted for 17 percent of the total supplemental payments
made by the five states, and payments to private providers accounted
for 26 percent of payments. Tables 12 and 13 show the distribution of
each state's fiscal year 2006 supplemental payments, by provider type
and provider ownership category, respectively.
Table 12: Supplemental Payments Made in Fiscal Year 2006 by Provider
Type in Five States, as Reported to GAO by the States in January 2008
(Dollars in millions):
State: California: DSH payments;
Payment amount (percentage of total[A]): Hospital: $2,347 (100%);
Payment amount (percentage of total[A]): Psychiatric hospital: [Empty];
Payment amount (percentage of total[A]): Nursing facility: [Empty];
Payment amount (percentage of total[A]): Physician group: [Empty];
Payment amount (percentage of total[A]): Clinic: [Empty];
Payment amount (percentage of total[A]): Managed care organization:
[Empty];
Total: $2,347 (100%).
State: California: Non-DSH payments;
Payment amount (percentage of total[A]): Hospital: $1,542 (99);
Payment amount (percentage of total[A]): Psychiatric hospital: [Empty];
Payment amount (percentage of total[A]): Nursing facility: $12 (1);
Payment amount (percentage of total[A]): Physician group: [Empty];
Payment amount (percentage of total[A]): Clinic: [Empty];
Payment amount (percentage of total[A]): Managed care organization:
[Empty];
Total: $1,554 (100).
State: California: Total payments;
Payment amount (percentage of total[A]): Hospital: $3,888 (100);
Payment amount (percentage of total[A]): Psychiatric hospital: [Empty];
Payment amount (percentage of total[A]): Nursing facility: $12 (0);
Payment amount (percentage of total[A]): Physician group: [Empty];
Payment amount (percentage of total[A]): Clinic: [Empty];
Payment amount (percentage of total[A]): Managed care organization:
[Empty];
Total: $3,900 (100).
State: Massachusetts: DSH payments;
Payment amount (percentage of total[A]): Hospital: [Empty];
Payment amount (percentage of total[A]): Psychiatric hospital: [Empty];
Payment amount (percentage of total[A]): Nursing facility: [Empty];
Payment amount (percentage of total[A]): Physician group: [Empty];
Payment amount (percentage of total[A]): Clinic: [Empty];
Payment amount (percentage of total[A]): Managed care organization:
[Empty];
Total: [Empty].
State: Massachusetts: Non-DSH payments;
Payment amount (percentage of total[A]): Hospital: $933 (57);
Payment amount (percentage of total[A]): Psychiatric hospital: $105
(6);
Payment amount (percentage of total[A]): Nursing facility: [Empty];
Payment amount (percentage of total[A]): Physician group: $19 (1);
Payment amount (percentage of total[A]): Clinic: [Empty];
Payment amount (percentage of total[A]): Managed care organization:
$577 (35);
Total: $1,634 (100).
State: Massachusetts: Total payments;
Payment amount (percentage of total[A]): Hospital: $933 (57);
Payment amount (percentage of total[A]): Psychiatric hospital: $105
(6);
Payment amount (percentage of total[A]): Nursing facility: [Empty];
Payment amount (percentage of total[A]): Physician group: $19 (1);
Payment amount (percentage of total[A]): Clinic: [Empty];
Payment amount (percentage of total[A]): Managed care organization:
$577 (35);
Total: $1,634 (100).
State: Michigan: DSH payments;
Payment amount (percentage of total[A]): Hospital: $285 (67);
Payment amount (percentage of total[A]): Psychiatric hospital: $142
(33);
Payment amount (percentage of total[A]): Nursing facility: [Empty];
Payment amount (percentage of total[A]): Physician group: [Empty];
Payment amount (percentage of total[A]): Clinic: [Empty];
Payment amount (percentage of total[A]): Managed care organization:
[Empty];
Total: $427 (100).
State: Michigan: Non-DSH payments;
Payment amount (percentage of total[A]): Hospital: $432 (56);
Payment amount (percentage of total[A]): Psychiatric hospital: [Empty];
Payment amount (percentage of total[A]): Nursing facility: $281 (37);
Payment amount (percentage of total[A]): Physician group: $34 (4);
Payment amount (percentage of total[A]): Clinic: $19 (3);
Payment amount (percentage of total[A] ): Managed care organization:
[Empty];
Total: $767 (100).
State: Michigan: Total payments;
Payment amount (percentage of total[A]): Hospital: $717 (60);
Payment amount (percentage of total[A]): Psychiatric hospital: $142
(12);
Payment amount (percentage of total[A]): Nursing facility: $281 (24);
Payment amount (percentage of total[A]): Physician group: $34 (3);
Payment amount (percentage of total[A]): Clinic: $19 (2);
Payment amount (percentage of total[A] ): Managed care organization:
[Empty];
Total: $1,193 (100).
State: New York: DSH payments;
Payment amount (percentage of total[A]): Hospital: $2,423 (80);
Payment amount (percentage of total[A]): Psychiatric hospital: $605
(20);
Payment amount (percentage of total[A]): Nursing facility: [Empty];
Payment amount (percentage of total[A]): Physician group: [Empty];
Payment amount (percentage of total[A]): Clinic: [Empty];
Payment amount (percentage of total[A]): Managed care organization:
[Empty]; Total: $3,028 (100).
State: New York: Non-DSH payments;
Payment amount (percentage of total[A]): Hospital: $385 (91);
Payment amount (percentage of total[A]): Psychiatric hospital: [Empty];
Payment amount (percentage of total[A]): Nursing facility: $36 (9);
Payment amount (percentage of total[A]): Physician group: [Empty];
Payment amount (percentage of total[A]): Clinic: [Empty];
Payment amount (percentage of total[A]): Managed care organization:
[Empty];
Total: $421 (100).
State: New York: Total payments;
Payment amount (percentage of total[A]): Hospital: $2,808 (81);
Payment amount (percentage of total[A]): Psychiatric hospital: $605
(18);
Payment amount (percentage of total[A]): Nursing facility: $36 (1);
Payment amount (percentage of total[A]): Physician group: [Empty];
Payment amount (percentage of total[A]): Clinic: [Empty];
Payment amount (percentage of total[A]): Managed care organization:
[Empty];
Total: $3,449 (100).
State: Texas: DSH payments;
Payment amount (percentage of total[A]): Hospital: $1,549 (100);
Payment amount (percentage of total[A]): Psychiatric hospital: [Empty];
Payment amount (percentage of total[A]): Nursing facility: [Empty];
Payment amount (percentage of total[A]): Physician group: [Empty];
Payment amount (percentage of total[A]): Clinic: [Empty];
Payment amount (percentage of total[A]): Managed care organization:
[Empty];
Total: $1,549 (100).
State: Texas: Non-DSH payments;
Payment amount (percentage of total[A]): Hospital: $530 (100);
Payment amount (percentage of total[A]): Psychiatric hospital: [Empty];
Payment amount (percentage of total[A]): Nursing facility: [Empty];
Payment amount (percentage of total[A]): Physician group: [Empty];
Payment amount (percentage of total[A]): Clinic: [Empty];
Payment amount (percentage of total[A]): Managed care organization:
[Empty];
Total: $530 (100).
State: Texas: Total payments;
Payment amount (percentage of total[A]): Hospital: $2,079 (100);
Payment amount (percentage of total[A]): Psychiatric hospital: [Empty];
Payment amount (percentage of total[A]): Nursing facility: [Empty];
Payment amount (percentage of total[A]): Physician group: [Empty];
Payment amount (percentage of total[A]): Clinic: [Empty];
Payment amount (percentage of total[A]): Managed care organization:
[Empty];
Total: $2,079 (100).
Total: DSH payments;
Payment amount (percentage of total[A]): Hospital: $6,604 (90);
Payment amount (percentage of total[A]): Psychiatric hospital: $747
(10);
Payment amount (percentage of total[A]): Nursing facility: [Empty];
Payment amount (percentage of total[A]): Physician group: [Empty];
Payment amount (percentage of total[A]): Clinic: [Empty];
Payment amount (percentage of total[A]): Managed care organization:
[Empty];
Total: $7,351 (100).
Total: Non-DSH payments;
Payment amount (percentage of total[A]): Hospital: $3,822 (78);
Payment amount (percentage of total[A]): Psychiatric hospital: $105
(2);
Payment amount (percentage of total[A]): Nursing facility: $329 (7);
Payment amount (percentage of total[A]): Physician group: $53 (1);
Payment amount (percentage of total[A]): Clinic: $19 (0);
Payment amount (percentage of total[A]): Managed care organization:
$577 (12);
Total: $4,905 (100).
Total: Grand total payments;
Payment amount (percentage of total[A]): Hospital: $10,425 (85%);
Payment amount (percentage of total[A]): Psychiatric hospital: $852
(7%);
Payment amount (percentage of total[A]): Nursing facility: $329 (3%);
Payment amount (percentage of total[A]): Physician group: $53 (0%);
Payment amount (percentage of total[A]): Clinic: $19 (0%);
Payment amount (percentage of total[A]): Managed care organization:
$577 (5%);
Total: $12,255 (100%).
Source: GAO analysis of data from a GAO survey of five states.
[A] Percentages less than 0.5 percent were rounded to zero; percentages
may not add to 100 because of rounding.
[End of table]
Table 13: Supplemental Payments Made in Fiscal Year 2006 by Provider
Ownership Category in Five States as Reported to GAO by the States in
January 2008 (Dollars in millions):
State: California: DSH payments;
Payment amount (percentage of total[A]): State government: $346 (15%);
Payment amount (percentage of total[A]): Local government: $1,934
(82%);
Payment amount (percentage of total[A]): Private: $67 (3%);
Payment amount (percentage of total[A]): All ownership categories:
$2,347 (100%).
State: California: Non-DSH payments;
Payment amount (percentage of total[A]): State government: $192 (12);
Payment amount (percentage of total[A]): Local government: $908 (58);
Payment amount (percentage of total[A]): Private: $453 (29);
Payment amount (percentage of total[A]): All ownership categories:
$1,554 (100).
State: California: Total payments;
Payment amount (percentage of total[A]): State government: $537 (14);
Payment amount (percentage of total[A]): Local government: $2,842 (73);
Payment amount (percentage of total[A]): Private: $521 (13);
Payment amount (percentage of total[A]): All ownership categories:
$3,900 (100).
State: Massachusetts: DSH payments;
Payment amount (percentage of total[A]): State government: [Empty];
Payment amount (percentage of total[A]): Local government: [Empty];
Payment amount (percentage of total[A]): Private: [Empty];
Payment amount (percentage of total[A]): All ownership categories:
[Empty].
State: Massachusetts: Non-DSH payments;
Payment amount (percentage of total[A]): State government: $134 (8);
Payment amount (percentage of total[A]): Local government: $802 (49);
Payment amount (percentage of total[A]): Private: $698 (43);
Payment amount (percentage of total[A]): All ownership categories:
$1,634 (100).
State: Massachusetts: Total payments;
Payment amount (percentage of total[A]): State government: $134 (8);
Payment amount (percentage of total[A]): Local government: $802 (49);
Payment amount (percentage of total[A]): Private: $698 (43);
Payment amount (percentage of total[A]): All ownership categories:
$1,634 (100).
State: Michigan: DSH payments;
Payment amount (percentage of total[A]): State government: $142 (33);
Payment amount (percentage of total[A]): Local government: $82 (19);
Payment amount (percentage of total[A]): Private: $203 (48);
Payment amount (percentage of total[A]): All ownership categories: $427
(100).
State: Michigan: Non-DSH payments;
Payment amount (percentage of total[A]): State government: [Empty];
Payment amount (percentage of total[A]): Local government: $158 (21);
Payment amount (percentage of total[A]): Private: $608 (79);
Payment amount (percentage of total[A]): All ownership categories: $766
(100).
State: Michigan: Total payments;
Payment amount (percentage of total[A]): State government: $142 (12);
Payment amount (percentage of total[A]): Local government: $240 (20);
Payment amount (percentage of total[A]): Private: $811 (68);
Payment amount (percentage of total[A]): All ownership categories:
$1,193 (100).
State: New York: DSH payments;
Payment amount (percentage of total[A]): State government: $833 (28);
Payment amount (percentage of total[A]): Local government: $1,420 (47);
Payment amount (percentage of total[A]): Private: $775 (26);
Payment amount (percentage of total[A]): All ownership categories:
$3,028 (100).
State: New York: Non-DSH payments;
Payment amount (percentage of total[A]): State government: [Empty];
Payment amount (percentage of total[A]): Local government: $421 (100);
Payment amount (percentage of total[A]): Private: [Empty];
Payment amount (percentage of total[A]): All ownership categories: $421
(100).
State: New York: Total payments;
Payment amount (percentage of total[A]): State government: $833 (24);
Payment amount (percentage of total[A]): Local government: $1,841 (53);
Payment amount (percentage of total[A]): Private: $775 (23);
Payment amount (percentage of total[A]): All ownership categories:
$3,449 (100).
State: Texas: DSH payments;
Payment amount (percentage of total[A]): State government: $453 (29);
Payment amount (percentage of total[A]): Local government: $687 (44);
Payment amount (percentage of total[A]): Private: $408 (26);
Payment amount (percentage of total[A]): All ownership categories:
$1,549 (100).
State: Texas: Non-DSH payments;
Payment amount (percentage of total[A]): State government: [Empty];
Payment amount (percentage of total[A]): Local government: $520 (98);
Payment amount (percentage of total[A]): Private: $10 (2);
Payment amount (percentage of total[A]): All ownership categories: $530
(100).
State: Texas: Total payments;
Payment amount (percentage of total[A]): State government: $453 (22);
Payment amount (percentage of total[A]): Local government: $1,208 (58);
Payment amount (percentage of total[A]): Private: $418 (20);
Payment amount (percentage of total[A]): All ownership categories:
$2,079 (100).
Total DSH payments:
Payment amount (percentage of total[A]): State government: $1,774 (24);
Payment amount (percentage of total[A]): Local government: $4,123 (56);
Payment amount (percentage of total[A]): Private: $1,454 (20);
Payment amount (percentage of total[A]): All ownership categories:
$7,351 (100).
Total non-DSH payments:
Payment amount (percentage of total[A]): State government: $326 (7);
Payment amount (percentage of total[A]): Local government: $2,810 (57);
Payment amount (percentage of total[A]): Private: $1,769 (36);
Payment amount (percentage of total[A]): All ownership categories:
$4,905 (100).
Grand total payments:
Payment amount (percentage of total[A]): State government: $2,099
(17%);
Payment amount (percentage of total[A]): Local government: $6,933
(57%);
Payment amount (percentage of total[A]): Private: $3,223 (26%);
Payment amount (percentage of total[A]): All ownership categories:
$12,255 (100%).
Source: GAO analysis of data from in a GAO survey of five states.
Note: States reported ownership by the three broad ownership
categories, however, we also compared the reported ownership category
of hospitals and nursing facilities to a database of providers
maintained by CMS that contains provider reported information on the
type of organization that operates the facilities. For the hospitals
and nursing facilities identified by the states that we were able to
match in CMS's database (796 of 961 hospitals; 351 of 479 nursing
facilities), our comparison identified discrepancies that may be due in
part to how the terms are defined. Of the 205 hospitals we identified
in CMS's database that states classified as local government, 15
percent were listed as non-profit and 3 percent were listed as
proprietary. Of the 17 hospitals we identified in CMS's database that
states classified as state government, 12 percent were listed as
nonprofit. Similarly, of the 93 nursing facilities we identified in
CMS's database that states classified as local government, 7 percent
were listed as private, either nonprofit (4 percent) or proprietary (3
percent).
[A] Percentages less than 0.5 percent were rounded to zero; percentages
may not add to 100 because of rounding.
[End of table]
[End of section]
Appendix V: Extent That Supplemental Payments Were Concentrated and
Providers Received Multiple Payments:
Data from the five surveyed states showed that the states concentrated
a large proportion of their DSH and non-DSH payments on a small
percentage of providers and that over one-quarter of providers received
payments from more than one supplemental payment program. In fiscal
year 2006, the states reported making total supplemental payments of
nearly $8 billion (63 percent of all supplemental payments) to 77
providers, which represented 5 percent of the providers receiving
supplemental payments in the five states. Officials also reported that
452 providers--representing 30 percent of all providers receiving a
supplemental payment in the five states--received payments from
multiple programs. Seventy-one providers received payments from at
least four programs, with payments exceeding $2.7 billion or 22 percent
of the total reported supplemental payments in the five surveyed
states. Table 14 shows the amount of each state's fiscal year 2006
supplemental payments that were paid to the 5 percent of providers
receiving the largest payments, and the remaining 95 percent of
providers. Table 15 shows the number of providers that received
payments from multiple supplemental payment programs and the amount of
payment received.
Table 14: Concentration of Supplemental Payments to Top 5 and Remaining
95 Percent of Providers Receiving Payments in Fiscal Year 2006 in Five
States, as Reported to GAO by the States in January 2008 (Dollars in
millions):
State: California: Number of providers receiving payment;
Top 5 percent of providers[A]: 14;
Remaining 95 percent of providers: 258;
Total, all providers: 272.
State: California: Payment amount;
Top 5 percent of providers[A]: $2,767;
Remaining 95 percent of providers: $1,133;
Total, all providers: $3,900.
State: California: Percentage of total payments;
Top 5 percent of providers[A]: 71%;
Remaining 95 percent of providers: 29%;
Total, all providers: 100%.
State: Massachusetts: Number of providers receiving payment;
Top 5 percent of providers[A]: 4;
Remaining 95 percent of providers: 78;
Total, all providers: 82.
State: Massachusetts: Payment amount;
Top 5 percent of providers[A]: $1,031;
Remaining 95 percent of providers: $603;
Total, all providers: $1,634.
State: Massachusetts: Percentage of total payments;
Top 5 percent of providers[A]: 63%;
Remaining 95 percent of providers: 37%;
Total, all providers: 100%.
State: Michigan: Number of providers receiving payment;
Top 5 percent of providers[A]: 33;
Remaining 95 percent of providers: 627;
Total, all providers: 660.
State: Michigan: Payment amount;
Top 5 percent of providers[A]: $685;
Remaining 95 percent of providers: $507;
Total, all providers: $1,193.
State: Michigan: Percentage of total payments;
Top 5 percent of providers[A]: 57%;
Remaining 95 percent of providers: 43%;
Total, all providers: 100%.
State: New York: Number of providers receiving payment;
Top 5 percent of providers[A]: 14;
Remaining 95 percent of providers: 256;
Total, all providers: 270.
State: New York: Payment amount;
Top 5 percent of providers[A]: $1,826;
Remaining 95 percent of providers: $1,624;
Total, all providers: $3,449.
State: New York: Percentage of total payments;
Top 5 percent of providers[A]: 53%;
Remaining 95 percent of providers: 47%;
Total, all providers: 100%.
State: Texas: Number of providers receiving payment;
Top 5 percent of providers[A]: 12;
Remaining 95 percent of providers: 235;
Total, all providers: 247.
State: Texas: Payment amount;
Top 5 percent of providers[A]: $1,306;
Remaining 95 percent of providers: $773;
Total, all providers: $2,079.
State: Texas: Percentage of total payments;
Top 5 percent of providers[A]: 63%;
Remaining 95 percent of providers: 37%;
Total, all providers: 100%.
State: Total: Number of providers receiving payment;
Top 5 percent of providers[A]: 77;
Remaining 95 percent of providers: 1454;
Total, all providers: 1531.
State: Total: Payment amount;
Top 5 percent of providers[A]: $7,615;
Remaining 95 percent of providers: $4,640;
Total, all providers: $12,255.
State: Total: Percentage of total payments;
Top 5 percent of providers[A]: 62%;
Remaining 95 percent of providers: 38%;
Total, all providers: 100%.
Source: GAO analysis of data from a GAO survey of five states.
Note: For each state we identified the percentage of payments made to
the 5 percent of providers receiving the largest amount of supplemental
payments. For all five states combined, this percentage was calculated
by adding the payments made to the 5 percent of providers receiving the
largest amount of payments in each state and dividing this number by
the total payments made by all five states.
[A] When calculating the number of providers representing 5 percent, we
rounded to the nearest whole number.
[End of table]
Table 15: Number of Providers Receiving Payments from Multiple
Supplemental Payment Programs in Five States for Fiscal Year 2006, as
Reported to GAO by the States in January 2008 (Dollars in millions):
State: California: Number of providers receiving payment;
1: 96;
2: 68;
3: 65;
4: 17;
5: 16;
6: 9;
7: [Empty];
8: 1;
Total: 272.
State: California: Payment amount;
1: $81;
2: $186;
3: $1,647;
4: $238;
5: $436;
6: $1,179;
7: [Empty];
8: $133;
Total: $3,900.
State: California: Percentage of total payments;
1: 2%;
2: 5%;
3: 42%;
4: 6%;
5: 11%;
6: 30%;
7: [Empty];
8: 3%;
Total: 100%.
State: Massachusetts:
Number of providers receiving payment;
1: 68;
2: 7;
3: 4;
4: 1;
5: [Empty];
6: 2;
7: [Empty];
8: [Empty];
Total: 82.
State: Massachusetts: Payment amount;
1: $1,044;
2: $87;
3: $32;
4: $18;
5: [Empty];
6: $453;
7: [Empty];
8: [Empty];
Total: $1,634.
State: Massachusetts: Percentage of total payments;
1: 64%;
2: 5%;
3: 2%;
4: 1%;
5: [Empty];
6: 28%;
7: [Empty];
8: [Empty];
Total: 100%.
State: Michigan: Number of providers receiving payment;
1: 536;
2: 44;
3: 55;
4: 23;
5: 2;
6: [Empty];
7: [Empty];
8: [Empty];
Total: 660.
State: Michigan: Payment amount;
1: $481;
2: $120;
3: $350;
4: $152;
5: $89;
6: [Empty];
7: [Empty];
8: [Empty];
Total: $1,193.
State: Michigan: Percentage of total payments;
1: 40%;
2: 10%;
3: 29%;
4: 13%;
5: 8%;
6: [Empty];
7: [Empty];
8: [Empty];
Total: 100%.
State: New York: Number of providers receiving payment;
1: 194;
2: 61;
3: 15;
4: [Empty];
5: [Empty];
6: [Empty];
7: [Empty];
8: [Empty];
Total: 270.
State: New York: Payment amount;
1: $1,268;
2: $675;
3: 1,507;
4: [Empty];
5: [Empty];
6: [Empty];
7: [Empty];
8: [Empty];
Total: $3,449.
State: New York: Percentage of total payments;
1: 37%;
2: 20%;
3: 44%;
4: [Empty];
5: [Empty];
6: [Empty];
7: [Empty];
8: [Empty];
Total: 100%.
State: Texas: Number of providers receiving payment;
1: 185;
2: 62;
3: [Empty];
4: [Empty];
5: [Empty];
6: [Empty];
7: [Empty];
8: [Empty];
Total: 247.
State: Texas: Payment amount;
1: $867;
2: $1,212;
3: [Empty];
4: [Empty];
5: [Empty];
6: [Empty];
7: [Empty];
8: [Empty];
Total: $2,079.
State: Texas: Percentage of total payments;
1: 42%;
2: 58%;
3: [Empty];
4: [Empty];
5: [Empty];
6: [Empty];
7: [Empty];
8: [Empty];
Total: 100%.
Total: Number of providers receiving payment;
1: 1,079;
2: 242;
3: 139;
4: 41;
5: 18;
6: 11;
7: [Empty];
8: 1;
Total: 1,531.
Total: Payment amount;
1: $3,740;
2: $2,280;
3: $3,536;
4: $408;
5: $525;
6: $1,632;
7: [Empty];
8: $133;
Total: $12,255.
Total: Percentage of total payments;
1: 31%;
2: 19%;
3: 29%;
4: 3%;
5: 4%;
6: 13%;
7: [Empty];
8: 1%;
Total: 100%.
Source: GAO analysis of data from a GAO survey of five states.
[End of table]
[End of section]
Appendix VI: Comments from the Department of Health & Human Services:
Department Of Health & Human Services:
Office of the Assistant Secretary for Legislation:
Washington, DC 20201:
May 15, 2008:
James Cosgrove:
Director, Health Care:
Government Accountability Office:
441 G Street NW:
Washington, DC 20548:
Dear Mr. Cosgrove:
Enclosed are the Department's comments on the Government Accountability
Office's (GAO) draft report, entitled: "MEDICAID: CMS Needs More
Information on the Billions of Dollars Spent on Supplemental Payments"
(GAO-08-614).
The Department appreciates the opportunity to review and comment on
this report before its publication.
Sincerely,
Signed by:
Jennifer P. Luong, for:
Vincent Ventimiglia, Jr.
Assistant Secretary for Legislation:
Attachment:
General Comments Of The Department Of Health And Human Services (HHS)
On The U.S. Government Accountability Office's (GAO) Draft Report
Entitled: Medicaid: CMS Needs More Information On The Billions Of
Dollars Spent On Supplemental Payments (GAO 08-614):
The draft report is in response to your review of the Medicaid
supplemental payments reported by States to the Centers for Medicare &
Medicaid Services (CMS) and your review of selected States to determine
the amount of supplemental payments made by five States, the types of
providers to whom such payments were made by the five States, and the
purposes of such payments. The draft report highlights that a
significant portion of the Medicaid payments subject to this review are
made by States to local government providers and are often concentrated
on a small proportion of providers. In addition, the draft report
recognizes the inconsistent and incomplete reporting by States of
Medicaid supplemental and upper payment limit (UPL) payments. The draft
report concludes that CMS lacks complete information on States'
Medicaid payments and that CMS has not reviewed all Medicaid
supplemental payment programs under the CMS financing initiative, which
began in August of 2003.
The draft report makes casual reference to the final rule published in
May of 2007, which in part, would limit Medicaid reimbursements to
certain providers operated by units of government to an amount that
does not exceed the provider's cost of providing Medicaid covered
services. However, in its 2007 Report, "Medicaid Financing: Federal
Oversight Initiative is Consistent With Medicaid Payment Principles but
Needs Greater Transparency" (GAO-07-214), the GAO recommended that CMS
issue guidance to clarify allowable financing arrangements, consistent
with Medicaid payment principles and further stated in its report that
the recommendation would remain open until such time that the May 2007
rule was finalized. Thus, the GAO has already officially validated that
the May 2007 rule would have addressed the concerns related to a
significant portion of the Medicaid supplemental payments referenced in
this draft report. First, the draft report highlights that a large
portion of the Medicaid supplemental and/or UPL payments are paid to
government (State and local) providers, which under the May 2007 rule
would no longer qualify for Medicaid supplemental and/or UPL payments
in excess of the cost of providing services to Medicaid individuals.
Second, the May 2007 rule codified Medicaid financing rules requiring
that providers retain their Medicaid payments, which would have
addressed financing concerns referenced in this report for those State
Medicaid supplemental and/or UPL payments programs that CMS has not
reviewed under its August 2003 financing initiative. The draft report
accurately identifies a Congressional moratorium placed on this rule
until May 25, 2008.
GAO Recommendations:
1. Expedite issuance of the final rule implementing additional
disproportionate share hospital (DSH) reporting requirements; and,
2. Develop a strategy to identify all of the supplemental payment
programs established in States' Medicaid plans and to review those that
have not been subject to review under CMS's August 2003 initiative.
HHS Response:
The CMS is generally in agreement with the draft recommendations and it
is consistent with ongoing efforts by the agency; however, we believe
the following considerations are critically important to the GAO's
development of the final report, as well as to ensure that the GAO and
CMS are in agreement with regard to the steps necessary to fulfill any
recommendations included in the final report:
Recommendation 1- While CMS intends to issue the final rule on DSH
auditing and reporting requirements, we are not clear why the issuance
of that regulation would be a primary recommendation for a report that
is more directly focused on State reporting of Medicaid supplemental
and UPL payments. We agree that the hospital-specific auditing and
reporting of DSH payments would necessarily include the reporting of
all Medicaid revenues received by an eligible DSH hospital in order to
ensure compliance with the hospital-specific DSH limits, including
Medicaid supplemental and/or UPL revenue. These auditing and reporting
requirements, however, are exclusive to only those hospitals that
qualify for DSH payments.
States with eligible uncompensated care costs in excess of their DSH
allotment often utilize Medicaid supplemental and/or UPL payments to
help hospitals subsidize such uncompensated care costs. Thus, hospitals
that receive Medicaid supplemental and/or UPL payments but that do not
receive DSH payments are not subject to the final rule on DSH auditing
and reporting requirements. Similarly, no information on Medicaid
supplemental and/or UPL payments is required under the DSH auditing and
reporting final rule for non-hospital providers receiving Medicaid
supplemental and/or UPL payments, including nursing facilities and
physicians. The law enacting the DSH auditing and reporting
requirements provided no authority for CMS to request such information.
In sum, by itself. the final rule on DSH auditing and reporting
requirements will not nearly capture the universe of health care
providers receiving Medicaid supplemental and/or UPL payments.
Moreover, the DSH program is a Congressionally instructed allotment
program, to which States are entitled each year to expend their entire
allotment.
Therefore, the S17 billion spending referenced in the draft report will
largely remain unchanged after the issuance of the final DSH auditing
and reporting rule. To the extent the auditing and reporting
requirements identify DSH overpayments to particular hospitals; States
may redistribute their DSH allotment spending in future years to other
qualified DSH hospitals, up to their hospital-specific DSH limit.
Recommendation 2 - Medicaid "supplemental payments" and "UPL payments"
are basically synonymous terms. In general, both of these are a type of
payment program that enhances regular Medicaid payment rates for
services provided to Medicaid beneficiaries. It is important to note
that both Medicaid supplemental and UPL payments are limited by the UPL
test and often States make payment up to the UPL, irrespective of
whether they refer to such Medicaid payments as supplemental, UPL, or
even enhanced payments.
Your report recognizes that local government providers are the
recipients of a significant portion of the Medicaid supplemental and/or
the UPL payments (and DSH). During the August 2003 financing
initiative, CMS addressed numerous financing arrangements associated
with Medicaid supplemental and/or UPL payments made by States to local
government providers to ensure such financing was consistent with
Federal requirements. As your report properly highlights, CMS took
action to end at least 68 supplemental payment programs in 30 States
that were inconsistent with the Federal requirements, many of which
involved local government providers.
We are enhancing our financing initiative strategy through the
modifications to the Medicaid expenditure reports in order to segregate
types of service to which the Medicaid supplemental payment applies.
This will allow CMS to better identify individual Medicaid payment
programs and will allow CMS to continue to ensure proper State
financing for any payment program that has yet to be reviewed under the
CMS financing initiative that began in August 2003. As noted in the
draft report, CMS anticipates the implementation of these changes to
the Medicaid expenditure reports by fiscal year 2009.
Finally, we do not believe facility-specific reporting of Medicaid
supplemental and/or UPL payments on the Medicaid expenditure reports is
feasible due to the volume of information that would be necessary to
transmit through the Medicaid Budget and Expenditure System. However,
CMS could request facility-specific information as hack-up
documentation to support the line-item expenditures during our review
of States' Medicaid expenditure reports. To the extent States do not
provide this information, CMS could withhold Federal funding associated
with the Medicaid supplemental and/or UPL payments for which CMS
requested such back-up documentation.
We thank the GAO staff for their work in this important area of
Medicaid supplemental payments reported by States to CMS.
[End of section]
Appendix VII: GAO Contact and Staff Acknowledgments:
GAO Contact:
James C. Cosgrove, (202) 512-7114 or Cosgrovej@gao.gov:
Acknowledgments:
In addition to the contact named above, Katherine M. Iritani, Assistant
Director; Susannah Bloch; Ted Burik; Tim Bushfield; Helen Desaulniers;
Elizabeth T. Morrison; Tom Moscovitch; Perry Parsons; and Hemi Tewarson
made key contributions to this report.
[End of section]
Related GAO Products:
Medicaid Financing: Long-Standing Concerns about Inappropriate State
Arrangements Support Need for Improved Federal Oversight. [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-08-650T]. Washington D.C.: April
3, 2008.
Medicaid Financing: Long-Standing Concerns about Inappropriate State
Arrangements Support Need for Improved Federal Oversight. [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-08-255T]. Washington D.C.:
November 1, 2007.
Medicaid Financing: Federal Oversight Initiative is Consistent with
Medicaid Payment Principles but Needs Greater Transparency. [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-07-214]. Washington D.C.: March
30, 2007.
High-Risk Series: An Update. [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-07-310]. Washington, D.C.: January 2007.
Medicaid Financial Management: Steps Taken to Improve Federal Oversight
but Other Actions Needed to Sustain Efforts. [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-06-705]. Washington D.C.: June
22, 2006.
Medicaid: States' Efforts to Maximize Federal Reimbursements Highlight
Need for Improved Federal Oversight. [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-836T]. Washington D.C.: June 28, 2005.
Medicaid Financing: States' Use of Contingency-Fee Consultants to
Maximize Federal Reimbursements Highlights Need for Improved Federal
Oversight. [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-748].
Washington D.C.: June 28, 2005.
Medicaid: Intergovernmental Transfers Have Facilitated State Financing
Schemes. [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-574T].
Washington D.C.: March 18, 2004.
Medicaid: Improved Federal Oversight of State Financing Schemes Is
Needed. [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-228].
Washington D.C.: February 13, 2004.
Major Management Challenges and Program Risks: Department of Health and
Human Services. [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-
101]. Washington D.C.: January 2003.
Medicaid: HCFA Reversed Its Position and Approved Additional State
Financing Schemes. [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-
147]. Washington D.C.: October 30, 2001.
Medicaid: State Financing Schemes Again Drive Up Federal Payments.
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/T-HEHS-00-193].
Washington D.C.: September 6, 2000.
Medicaid: States Use Illusory Approaches to Shift Program Costs to
Federal Government. [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO/HEHS-94-133]. Washington D.C.: August 1, 1994.
[End of section]
Footnotes:
[1] GAO, High-Risk Series: An Update, [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-07-310] (Washington, D.C.:
January 2007).
[2] This figure represents combined federal and state Medicaid
expenditures for provider services in fiscal year 2006, the latest year
for which data were available. For the purpose of this report,
expenditures for administration are not included.
[3] Under a statutory formula, the federal government may reimburse
from 50 to 83 percent of a state's Medicaid expenditures for services.
States with lower per capita incomes receive higher federal matching
rates. 42 U.S.C. §§ 1396b(a), 1396d(b).
[4] Medicaid programs are administered by the 50 states, the District
of Columbia, Puerto Rico, and 4 U.S. territories.
[5] For example, in a 2004 report, we found that states were continuing
to claim excessive federal matching funds through supplemental payment
arrangements. Among other recommendations, we recommended that Congress
consider a recommendation that remained unimplemented from a 1994
report that would prohibit Medicaid payments to government facilities
that exceeded their costs. See GAO, Medicaid: States Use Illusory
Approaches to Shift Program Costs to Federal Government, [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO/HEHS-94-133] (Washington, D.C.:
Aug. 1, 1994). We also recommended that CMS improve its oversight of
states' Medicaid supplemental payments by improving state reporting on
upper payment limit arrangements, including requiring reporting on
facility-specific payments. See Medicaid: Improved Federal Oversight of
State Financing Schemes Is Needed, [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-04-228] (Washington, D.C.: Feb. 13, 2004).
[6] This federal initiative was launched in August 2003 by the Centers
for Medicare & Medicaid Services (CMS), the federal agency that
oversees states' Medicaid programs, to review and evaluate the
appropriateness of states' Medicaid payments by assessing whether
states had inappropriate financing arrangements that required providers
to return payments to the states. In a 2007 report, we reviewed this
initiative and found that more transparency was needed regarding the
way in which CMS was implementing its initiative and the review
standards it was using to end certain arrangements. See Medicaid
Financing: Federal Oversight Initiative is Consistent with Medicaid
Payment Principles but Needs Greater Transparency, [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-07-214] (Washington, D.C.: Mar.
30, 2007).
[7] In May 2007, CMS issued a final rule that, if implemented, would
impose additional limits and requirements for states when seeking
federal reimbursement for supplemental payments made to providers.
Congress placed a moratorium on this rule until May 25, 2008.
[8] In this report, we use the term program to refer to an individual
supplemental payment arrangement to make payments to certain providers.
[9] See 42 U.S.C. §§ 1396a(13)(A), 1396r-4.
[10] Federal regulations applicable during the course of our review
defined UPLs for services provided by hospitals, nursing facilities,
intermediate care facilities for the mentally retarded, and clinics.
These UPLs are based on an estimate of the amount that Medicare, the
federal health program that covers seniors aged 65 and older and some
disabled persons, pays for comparable services. See 42 C.F.R. §§
447.272, 447.321 (2006).
[11] Section 1115 of the Social Security Act authorizes the Secretary
of Health and Human Services to waive compliance with certain federal
Medicaid requirements, as well as to authorize Medicaid expenditures
that would not otherwise be allowable, for demonstration projects that
are likely to promote Medicaid objectives. See 42 U.S.C. § 1315.
Throughout this report, we refer to section 1115 demonstrations as
Medicaid demonstrations.
[12] In this report, we use the terms non-DSH payments and non-DSH
supplemental payments interchangeably.
[13] Specifically, 42 C.F.R. § 447.201 requires that state Medicaid
plans describe the policy and the methods to be used in setting payment
rates for each type of service included in the state's Medicaid
program. Supplemental payments administered under Medicaid
demonstrations generally are governed by the terms and conditions
approved by CMS for each demonstration, which are not part of the state
plan.
[14] Throughout this report, the term fiscal year refers to the federal
fiscal year. States can make adjustments to their CMS-64 submissions
for up to 2 years. Our analysis of CMS fiscal year 2006 expenditure
data incorporated adjustments to expenditures that had been submitted
by states through the end of fiscal year 2006 for DSH payments, and as
of October 5, 2007, for non-DSH supplemental payments (see app. I).
[15] Federal regulations applicable during the time of our review apply
UPLs for certain services on an aggregate basis to three categories of
facilities: state-government-owned or -operated facilities, nonstate-
government-owned or -operated facilities, and privately owned and
operated facilities. See 42 C.F.R. §§ 447.272, 447.321 (2006). CMS
requires states to report on expenditure reports non-DSH supplemental
payments made under the UPL separately by these three categories. In
this report, we use the term local government to describe the nonstate
government category.
[16] T.A. Coughlin, S. Zuckerman, and J. McFeeters, "Restoring Fiscal
Integrity to Medicaid Financing? Some progress has been made in
reforming Medicaid financing, yet problems persist," Health Affairs,
vol. 26, no. 5 (2007).
[17] For each provider, our survey asked states to list its type of
ownership: state government, nonstate government, or private. We have
reported the provider ownership category as reported by the states in
response to our survey.
[18] We did not include programs authorized under a Medicaid
demonstration in this analysis since they are administered under the
terms and conditions of Medicaid demonstrations, rather than under
states' Medicaid plans.
[19] 42 U.S.C. §§ 1396a, et seq.
[20] In addition, states may also receive approval from CMS for a
Medicaid demonstration. Under these demonstrations, states may cover
populations, cover services, or establish payment methodologies
differently from the state Medicaid plan.
[21] 42 U.S.C. §§ 1396b(a), 1396d(b).
[22] See 42 U.S.C. § 1396a(a)(2).
[23] In this report, we use the term state share to refer to the
nonfederal share of Medicaid payments.
[24] Local governments and local government providers can contribute to
the state share of Medicaid payments through mechanisms known as
intergovernmental transfers and certified public expenditures.
Intergovernmental transfers are a mechanism in state finance that
enables state and local governments to carry out their shared
functions, for example, through the transfer of revenues between
government entities. When certified public expenditures are used to
fund the state share, a government provider certifies to the state its
Medicaid expenditures. The state then claims federal reimbursement for
the federal share of that amount. See 42 U.S.C. § 1396b(w)(6).
[25] See Medicaid Voluntary Contribution and Provider-Specific Tax
Amendments of 1991, Pub. L. No. 102-234, § 3, 105 Stat. 1793, 1799-1804
(1991) (codified, as amended, at 42 U.S.C. § 1396r-4(f)). Congress has
amended requirements for calculating these DSH allotments since their
establishment. Currently, CMS calculates each state's fiscal year DSH
allotment using a statutorily defined formula.
[26] See 42 U.S.C. § 1396r-4(g).
[27] Federal regulations applicable during the course of our review
define certain UPLs based on a reasonable estimate of what Medicare--
the federal heath care program for seniors aged 65 and older and some
disabled individuals--pays for comparable services. Separate UPLs exist
for inpatient services provided by hospitals, nursing facilities, and
intermediate care facilities for the mentally retarded, and outpatient
services provided by hospitals and clinics. These UPLs are applied on
an aggregate basis to three categories of providers: local (nonstate)
government-owned or -operated facilities, state-government-owned or -
operated facilities, and privately owned and operated facilities. See
42 C.F.R. §§ 447.272, 447.321 (2006).
[28] Supplemental payments administered under Medicaid demonstrations
generally are governed by terms and conditions approved by CMS for each
demonstration, which are not part of the state plan.
[29] A list of related GAO products can be found at the end of this
report.
[30] See [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-214].
[31] 72 Fed. Reg. 29,748 (May 29, 2007).
[32] We have recommended that Congress prohibit Medicaid payments to
government providers that exceed their costs. See GAO, Medicaid: States
Use Illusory Approaches to Shift Program Costs to Federal Government,
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/HEHS-94-133]
(Washington, D.C.: Aug. 1, 1994).
[33] Medicaid DSH payments would not be included under this regulatory
limit. DSH payments, however, are already subject to defined limits
under federal Medicaid law. The final rule, if implemented, also would,
among other things, (1) provide criteria that states must apply in
determining whether a provider or other entity is a unit of government
for the purposes of financing the state share of Medicaid payments, (2)
require states to allow providers to retain all of the Medicaid
payments made to them, and (3) require governmental providers to submit
cost reports to states when claims for federal reimbursement are based
on certified public expenditures.
[34] U.S. Troop Readiness, Veterans Care, Katrina Recovery, and Iraq
Accountability Appropriations Act, Pub. L. No. 110-28, § 7002, 121
Stat. 112, 187 (2007). In addition, on March 11, 2008, a suit was filed
against HHS and CMS, under which plaintiffs are requesting that a court
prohibit the federal government from implementing this final rule.
Plaintiffs allege that HHS and CMS exceeded their authority under
federal law in publishing this final rule with respect to the
following: (i) requiring states to impose certain criteria when
determining the governmental status of entities eligible to finance the
state share of Medicaid expenditures, (ii) limiting Medicaid
reimbursement for certain governmental providers to the cost of
Medicaid services and (iii) publishing a final rule despite a
Congressional moratorium prohibiting such action. On May 23, 2008, the
Court determined that HHS and CMS violated the congressional moratorium
and ordered that the rule be vacated and returned to CMS. Thus, the
rule did not go into effect on May 25, 2008. See Alameda County Medical
Center, et al. v. Leavitt, et al., no. 1:08-00422 (D.D.C. filed Mar.
11, 2008).
[35] Here, the term Medicaid payments refers to a state's medical
assistance payments, which are the total Medicaid payments made by a
state for services, including supplemental payments but not including
administrative costs.
[36] For the purpose of receiving federal matching funds, states
include non-DSH payments on other sections of the CMS expenditure
report.
[37] For non-DSH payments made under the UPL, the CMS 64.9I forms do
separately identify payments to these categories of providers. These
categories correlate with UPLs for certain services, which are applied
to three separate categories as defined under federal regulations
applicable during the time of our review: state-government-owned or -
operated facilities, local-government-owned or -operated facilities,
and privately owned and operated facilities. See 42 C.F.R. §§ 447.272,
447.321(2006). CMS expenditure reports currently do not separately
identify DSH payments made to state government, local government, and
private providers.
[38] Coughlin, Zuckerman, and McFeeters, "Restoring Fiscal Integrity To
Medicaid Financing? Some progress has been made in reforming Medicaid
financing, yet problems persist."
[39] California reported about $530 million more in non-DSH payments to
us than they reported to CMS, and Massachusetts reported over $1.6
billion in non-DSH payments to us, but did not report these payments to
CMS. Officials from these two states attributed the differences to
supplemental payments made under Medicaid demonstrations that the
states did not report on their CMS 64.9I forms, a section of the CMS
expenditure report for reporting non-DSH supplemental payments made
under the UPL. The instructions for completing the CMS 64.9I form do
not specify whether supplemental payments under Medicaid demonstrations
should be included. In addition, Michigan reported about $753 million
more to us in non-DSH payments than the state reported to CMS on its
CMS 64.9I form.
[40] The Urban Institute defined Medicaid supplemental payments as
enhanced payments made to providers over and above regular Medicaid
payment. CMS's 64.9I form defines supplemental payments as additional
payments to providers to supplement or enhance the regular Medicaid
payment. Neither the Urban Institute survey instructions nor the
instructions for the CMS 64.9I form specified whether states should
report supplemental payments under Medicaid demonstrations. We did not
reconcile the differences we identified.
[41] States receive federal matching funds for non-DSH payments based
on the information they provide on other sections of the CMS-64 report.
Reimbursement for UPL payments is based on the CMS 64.9 base form,
where UPL payments are combined and reported with other standard
Medicaid payments. Reimbursement for supplemental payments made under
Medicaid demonstrations is based on CMS 64.9 waiver forms, and
reporting requirements can vary by demonstration.
[42] Congress mandated improvements to DSH reporting in 1997 and 2003,
including requiring states to report provider-level information on each
DSH program they administer. The Balanced Budget Act of 1997, Pub. L.
No. 105-33, § 4721(c), 11 Stat. 251, 514 (1997) (codified, as amended,
at 42 U.S.C. § 1396r-4(a)(2)) required states to provide an annual
report to the Secretary of Health and Human Services describing DSH
payments made to each hospital. The Medicare Prescription Drug,
Improvement, and Modernization Act of 2003, Pub. L. No. 108-173, §
101(d), 117 Stat. 2066, 2430-2431 (2003) (codified, as amended, at 42
U.S.C. § 1396r-4(j)) mandated that beginning in fiscal year 2004, HHS
require states to submit to HHS an annual report identifying DSH
payments and the hospitals receiving these payments and to submit an
annual independently certified audit that verifies states' compliance
with certain federal requirements for DSH payments.
[43] The proposed DSH reporting rule, if finalized, would also require
that states report other information about each DSH hospital, including
whether the hospital is state government, local government, or private,
the unduplicated number of Medicaid-eligible and uninsured individuals
who received hospital services, and the amount of funds transferred by
the hospital to a state or local government as a condition of receiving
Medicaid payments, if any. States would also be required to submit an
annual independently certified audit that verifies states' compliance
with federal requirements for DSH payments. See 70 Fed. Reg. 50,262
(Aug. 26, 2005).
[44] As part of our review we assessed the sufficiency of CMS's
oversight of state UPL payment arrangements to ensure that claims
submitted by states are calculated appropriately and are eligible for
federal Medicaid reimbursement. We found that CMS had taken a number of
steps to strengthen its oversight, but also found that the agency did
not have a process to identify supplemental payments made to specific
facilities. To further strengthen CMS oversight, we recommended that
the agency require states to report UPL payments made to individual
providers. See [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-
228].
[45] The five states reported administering a total of 52 supplemental
payment programs in fiscal year 2006, but reported making no payments
from 4 programs.
[46] On August 24, 2005, CMS approved a Medicaid demonstration in
California, the California MediCal Hospital Uninsured Care
Demonstration. This demonstration was in effect during fiscal year
2006. The demonstration created a non-DSH program, the Safety Net Care
Pool, for designated governmental providers. Through this program, the
state can use funds from the pool to stabilize the government hospital
system and expand healthcare coverage to the uninsured. Safety Net Care
Pool funds may be accessed only by the state, counties, or cities and
designated providers for uncompensated costs of medical services
provided to uninsured individuals, as agreed upon by CMS and the state.
[47] On January 26, 2005, CMS approved a 3-year extension to the
Medicaid demonstration in Massachusetts, the MassHealth Medicaid
demonstration. The demonstration, which was in effect during fiscal
year 2006, created a Safety Net Care Pool, which represents the
combined total of what Massachusetts had previously spent on DSH
programs and non-DSH payments to Medicaid managed care organizations.
In fiscal year 2006, the state funded 10 non-DSH programs through the
Safety Net Care Pool, some of which had been DSH programs prior to
their inclusion in the demonstration.
[48] The scope of this report did not include an assessment of whether
states' DSH or non-DSH programs were consistent with federal
requirements.
[49] Thirteen supplemental payment programs that made payments in
fiscal year 2006 operated under Medicaid demonstrations rather than
state Medicaid plans. We did not include these programs in this
analysis since they were administered under the terms and conditions of
a Medicaid demonstration.
[50] Of the six programs approved prior to CMS's 2003 initiative, three
are DSH programs and three are non-DSH programs. The three DSH programs
had fiscal year 2006 payments totaling $1.2 billion (16 percent of the
total DSH payments made under the five states' Medicaid plans). The
three non-DSH programs had fiscal year 2006 payments totaling $30
million (1 percent of the total non-DSH payments made under the five
states' Medicaid plans).
[51] One state, Massachusetts, reported making supplemental payments to
Medicaid managed care organizations under a Medicaid demonstration.
This program ended on June 30, 2006. See app. III for additional
details.
[52] The state's supplemental payments to managed care organizations
ended on June 30, 2006.
[53] In general, providers receiving larger payments also received
payments from more programs: the 5 percent of providers receiving the
largest total payments received payments, on average, from about 3.1
programs each, while the remaining 95 percent of providers received
payments, on average, from about 1.4 programs each.
[54] Section 1115 of the Social Security Act authorizes the Secretary
of Health and Human Services to waive compliance with certain federal
Medicaid requirements as well as to authorize Medicaid expenditures
that would not otherwise be allowable for demonstration projects that
are likely to promote Medicaid objectives. See 42 U.S.C. § 1315.
Throughout this report, we refer to section 1115 demonstrations as
Medicaid demonstrations. Supplemental payments administered under
Medicaid demonstrations are generally governed by terms and conditions
approved by CMS established for each demonstration. In this report, we
use the terms non-DSH payments and non-DSH supplemental payments
interchangeably to include both UPL payments and supplemental payments
made under Medicaid demonstrations.
[55] Throughout this report, the term fiscal year refers to the federal
fiscal year.
[56] Federal regulations applicable during the time of our review apply
UPLs for certain services on an aggregate basis to three categories of
facilities: state-government-owned or -operated facilities, non-state-
government-owned or -operated facilities, and privately owned and
operated facilities. See 42 C.F.R. §§ 447.272, 447.321 (2006). The CMS-
64 requires states to separate non-DSH payment information by these
categories.
[57] States receive federal matching funds for non-DSH payments based
on the information they provide on other sections of the CMS-64 report.
Reimbursement for UPL payments is based on the CMS 64.9 base form,
where UPL payments are combined and reported with other standard
Medicaid payments. Reimbursement for supplemental payments made under
Medicaid demonstrations is based on CMS 64.9 waiver forms, and
reporting requirements can vary by demonstration.
[58] Reporting of supplemental payments under Medicaid demonstrations
can vary by demonstration. The instructions for completing the CMS
64.9I form do not specify whether supplemental payments under Medicaid
demonstrations should be included.
[59] In a 2007 report, the Urban Institute reported for 35 states
fiscal year 2005 UPL payments as a percentage of these states' total
Medicaid spending (see T.A. Coughlin, S. Zuckerman, and J. McFeeters,
"Restoring Fiscal Integrity to Medicaid Financing? Some progress has
been made in reforming Medicaid financing, yet problems persist,"
Health Affairs, vol. 26, no. 5 (2007)). We imputed the dollar amount of
these states' UPL payments by multiplying the percentages reported by
the Urban Institute by each state's fiscal year 2005 total Medicaid
spending, as reported to CMS.
[60] On August 24, 2005, CMS approved a Medicaid demonstration in
California, the California MediCal Hospital Uninsured Care
Demonstration. The demonstration created a supplemental payment
program, the Safety Net Care Pool, for designated governmental
providers. Through this program, the state can use funds from the pool
to stabilize the government hospital system and expand health care
coverage to the uninsured. Safety Net Care Pool funds may be accessed
only by the state, counties, or cities and designated providers for
uncompensated costs of medical services provided to uninsured
individuals, as agreed upon by CMS and the state. On January 26, 2005,
CMS approved a 3-year extension to the Medicaid demonstration in
Massachusetts, the MassHealth Medicaid demonstration. The
demonstration, which was in effect during fiscal year 2006, created a
Safety Net Care Pool of $1.34 billion per year, which represents the
combined total of what Massachusetts had previously spent on DSH
programs and supplemental payments to Medicaid managed care
organizations. The state funded 10 non-DSH supplemental payment
programs through the Safety Net Care Pool, some of which had been DSH
programs prior to their inclusion in the demonstration.
[61] For each provider, our survey asked states to list its type of
ownership: state government, nonstate government, or private. We have
reported provider ownership category as reported by the states in
response to our survey.
[62] We did not include programs authorized under a Medicaid
demonstration in this analysis since they are administered under the
terms and conditions of the demonstrations, rather than under the
states' Medicaid plans.
[63] CMS maintains a database called the On-Line Survey, Certification,
and Reporting system that contains information on all health care
providers participating in Medicare and Medicaid. This system is used
to monitor health care facilities' compliance with federal health and
safety standards. The On-Line Survey, Certification, and Reporting
system contains provider-reported information on the type of
organization that operates each facility, for example, whether the
facility is state government, local government, nonprofit, or
proprietary.
[End of section]
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Contact:
Web site: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm]:
E-mail: fraudnet@gao.gov:
Automated answering system: (800) 424-5454 or (202) 512-7470:
Congressional Relations:
Ralph Dawn, Managing Director, dawnr@gao.gov:
(202) 512-4400:
U.S. Government Accountability Office:
441 G Street NW, Room 7125:
Washington, D.C. 20548:
Public Affairs:
Chuck Young, Managing Director, youngc1@gao.gov:
(202) 512-4800:
U.S. Government Accountability Office:
441 G Street NW, Room 7149:
Washington, D.C. 20548:
