NH Reimbursement Cuts “Highly Likely” a Federal Medicaid Rules Violation

The New Hampshire government is coming under fire from both the Centers for Medicare and Medicaid Services (CMS) and several hospitals located in the state for its deep cuts to the state’s Medicaid program. The state is currently being sued by ten hospitals, which allege that New Hampshire Medicaid patients have lost adequate access to care after the state legislature eliminated disproportionate share (DSH) funding to hospitals. In addition to the lawsuit, the hospitals requested intervention from CMS, which is now investigating the state’s actions to ascertain whether federal Medicaid rules were violated.

“Medicaid Enhancement Tax”

For approximately 19 years, New Hampshire hospitals have been subject to a “Medicaid Enhancement Tax,” which was utilized to acquire matching federal funds for the state’s Medicaid program. According to the hospitals’ complaint, the tax was expressly for the purpose of securing Medicaid funds, which would, in turn, be paid back to the hospitals in the form of DSH payments, to compensate for the cost of unpaid care for Medicaid patients.

In 2011, the state’s legislature approved a plan to divert all of the revenue raised from the “Medicaid Enhancement Tax” to the balancing of the state’s budget. The loss of this payment is costing hospitals a fortune, approximately $100 million per year for one of the hospitals in the suit. The hospitals claim that, in conjunction with a series of additional reimbursement cuts made over the past three years, the loss of the DSH payment is putting the hospitals, Medicaid patients and physicians in great risk of irreparable harm.

“Highly Likely” a Violation

They cite a legislative report, which accompanied the enactment of DSH funding in Congress, which stated that, while states have flexibility in administering their programs, their policies should not “result in arbitrary and unduly low reimbursement levels for hospital services.” The hospitals are seeking injunctive and declaratory relief per the Medicaid Act to enjoin state officials from “implementing illegally imposed rates and making inadequate payments.” The federal judge hearing the case concluded, in March, that New Hampshire’s actions had “highly likely” failed to meet the federal Medicaid Act’s criteria.

CMS issued a letter to the Commissioner of the New Hampshire Department of Health and Human Services, Nicolas Toumpas, on May 23rd, which threatened to take compliance action against the state if it did not provide CMS with requested information within 30 days. While CMS did not specify what action would be taken against the state, the penalty could be as harsh as withholding federal Medicaid funding. CMS requests that New Hampshire provide information that demonstrates “in a comprehensive and data-driven way” that health service rates are adequate when evaluated in light of past rate levels and access to heath care and that ongoing efforts are being made to engage beneficiaries.

The federal agency stated that it had been requesting this information from New Hampshire for four months and that it had provided the state with examples of data evaluation methods that had been successful for other states; however, New Hampshire has failed to sufficiently respond. Vice president of government affairs at plaintiff hospital Dartmouth-Hitchcock Medical Center, Frank McDougall said, “When you hear from a federal judge that the (Medicaid) program is below standard and broken and then you hear it from a . . . federal agency, I think they validate each other.”

The New Hampshire Commissioner defended his agency, claiming that CMS mischaracterized the situation by not acknowledging the state’s “prompt, responsive actions.” While he acknowledged that the state still had documents to submit, he asserted that it had already sent “definitive, detailed information, factual corrections, data, and analysis of the providers’ assertions, all of which is highly responsive” to CMS’ inquiries, some of which CMS has refused to review. He claims that CMS cannot prove that patients eligible for Medicaid cannot find treatment.