Uncompensated hospital care falls in Medicaid expansion states, but hospitals still worry

Medicaid expansion and other changes related to Medicaid payments are very important to the financial viability of hospitals. For example, according to a Kaiser Family Foundation (KFF) analysis, the expansion of Medicaid coverage under section 2001 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) helped hospitals by producing a nationwide decline in uncompensated care from $34.9 billion in 2013 to $28.9 billion in 2014, the year the expansion took place. At the same time, however, KFF found that despite the financial gains from declining uncompensated care, hospitals fear that these gains may be offset by a higher volume of Medicaid payments that may be lower than the actual hospital costs.

The KFF analysis confirms that most of the reduction in uncompensated care occurred in Medicaid expansion states. Specifically, in expansion states uncompensated care declined from $16.7 billion in 2013, to $11 billion in 2014, a 35 percent reduction. In non-expansion states, uncompensated care dropped from $18.1 billion in 2013, to $17.9 billion in 2014, a reduction of less than one percent.

KFF points out that the federal disproportionate share hospital (DSH) allotments, totaling $11.7 billion in 2014, will drop by $2 billion in fiscal year (FY) 2018 and by a total of $43 billion between FY’s 2018 and 2025. As a result, KFF’s survey of hospitals and their associations found a growing concern that the increase in revenue from Medicaid expansion will not fully offset the reduction in federal Medicaid DSH payments.

KFF notes that the coming reduction in DSH payments may affect safety net hospitals, in particular, due to their (1) high dependence on Medicaid DSH funds, (2) high numbers of uninsured patients, (2) few privately-insured or Medicare patients, and (4) generally weaker financial condition.

In addition to the effect of reduced DSH payments, KFF warns that hospitals may also be hurt if CMS limits Medicaid supplemental payments to hospitals in the future. This is because many hospitals rely on supplemental payments to increase payments above their actual costs. KFF believes that the impact of reductions in supplemental payments will ultimately depend on whether states will offset reductions with increases to their Medicaid base rates paid to hospitals.

Highlight on Montana: Medicaid copay increases kick in; providers worry about burden

Planned increases for Montana’s Medicaid copayments went into effect on June 1, 2016. The changes set forth a copayment amount for certain Medicaid members, with copayments not to exceed a combined limit of 5 percent of the family’s household income quarterly. Some are concerned that the increases could burden low-income patients.

Copayment increases

Under the changes, which were spurred by a provision in Montana’s Medicaid expansion plan, members will income above 100% of the federal poverty level (FPL) will be responsible for a 10 percent copayment of the provider’s reimbursed amount for any Medicaid-covered service. For members with income at or below 100 percent of the FPL will be responsible for a copay of $4 for preferred brand drugs and an $8 copay for non-preferred brand and specialty drugs; $3-$4 copay for dental, home health, licensed professional counselor, psychologist, licensed clinical social worker, and speech therapy services; $2-$4 copay for audiology, hearing aids, occupational therapy, optician/optometric, and physical therapy services; $1-$4 copay for public health clinic services; and $0-$4 copay for home dialysis attendant, personal assistance, independent lab and x-ray, mental health clinic, chemical dependency, and targeted case management services. Provider preventable healthcare acquired conditions, generic drugs, and approved preventive services no longer require a copayment. Providers may not deny services if the member is at or below 100 percent of the FPL and is unable to pay copayments. The member remains responsible for paying any copayments owed to the provider.

American Indians and Alaska Natives who are eligible for or have received a service from a Tribal health, Urban Indian clinic, or Indian Health Service provider; terminally ill members receiving hospice services; and members who are receiving services under the Medicaid breast and cervical cancer treatment category will no longer have copayments.

Burden to low-income members

Barb Mettler, executive director of the Mental Health Center in Billings, Montana, expressed concern that the increases will affect the poorest and most vulnerable Medicaid members, who may use Medicaid-covered services several times a week. “The way I see it is they have three options. They find an additional way to pay, they don’t pay, or they stop using the services,” Mettler said. Even with caps on the total copay, she worries that clients will choose not to seek the care they need.

The burden on patients translates to a burden on health care providers. Under the new changes, providers cannot and will not turn away people at or below 100 percent of the FPL who are unable to pay the copayments, requiring the facility to make up the costs. According to Mettler, the Mental Health Center had to make up a shortfall of about $500,000 of unpaid patient charges in 2015, after already having to factor charity care and bad debt into its budget.

Examining the role of data and analytics in fighting fraud, waste, and abuse

On June 7, 2016, a podcast interview of Dr. Caryl Brzymialkiewicz, Chief Data Officer for the HHS Office of Inspector General (OIG) was made available by the OIG. In the podcast, Brzymialkiewicz provided insight into how the OIG uses data and analytics to reduce healthcare fraud, waste and abuse.

The Chief Data Office officially came into existence last year, but the OIG’s advanced analytic team has been around for several years. Brzymialkiewicz indicated that her office is currently focusing on: (1) how to accelerate the work of the advanced analytic team; (2) how to help the OIG to become even more effective and efficient; (3)  improving access to data; (4) supporting OIG investigators in their cases, with audits and evaluations, and in determining what other datasets they need; and (5) making sure the data the OIG has is high quality data. One current example of the office’s focus is its work with CMS as it creates a new nationwide Medicaid data set. According to Brzymialkiewicz, “we’re working closely with [CMS] to understand, as they’re implementing their new system, what does [it] mean, [and] how can we potentially tap into that environment.”

Brzymialkiewicz defined advanced analytics as “having high quality lead-generation for either our investigators, our auditors, our evaluators or for compliance oversight.” According to Brzymialkiewicz, advanced analytics data can either lead to someone that is potentially committing fraudulent activity or OIG investigators can bounce information from a hotline call or from a whistleblower  against the data to help make a case of fraud.

Brzymialkiewicz described her office’s predictive analytics space, where they use statistical models to generate risk scores. These scores can result in a pharmacy or provider being designated low, medium, or high risk. She opined that for high risk entities the OIG might want to apply a little more scrutiny. She indicated that her office plans to accelerate their predictive analytic work.

With regard to internal support at OIG, Brzymialkiewicz stated that her office is working to support senior leadership, to help inform their decisions, to facilitate the right conversations about where to allocate resources, and to help position the OIG to compete for increasingly scarce resources across the entire government.

Her office is heavily invested in developing additional tools to fight fraud, waste and abuse. She described the development process as one of trying to democratize data, so that rather than requiring the whole organization to understand programing language, investigators will instead have easy-to-use tools in their hands to accomplish their goals.

Finally, she described the need for link analysis to determine the possible connectedness between providers. According to Brzymialkiewicz, this would allow the OIG to look at providers that have high risk scores to see how they are connected to other entities that may also be committing fraud.

The importance of parity and the problem of unenforcement

Federal law requires that mental health benefits are equivalent—in terms of restrictions and limitations—with medical health benefits. However, the specific provisions of the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) and the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) that mandate the parity are, in many cases, going unenforced. The result is that individuals are having trouble accessing care—the very problem the parity was designed to remedy.


Although there many potential reasons why the parity rules aren’t being followed, one report suggests the failures are caused by the difficulty of implementing the ACA and the slow regulatory processes of the federal government. For example, the rules that govern parity for private insurers were not put into effect until 2014 and some rules—those pertaining to parity for Medicaid plans—have yet to take effect.

High stakes

The importance of parity is illustrated by the number of individuals with mental health and substance use disorders. According to the most recent survey by the U.S. Substance Abuse and Mental Health Services Administration (SAMHSA), almost 44 million adults experienced some form of a mental illness. According to SAMHSA, fewer than half of those individuals receive mental health care. Additionally, 20.2 million adults had a substance abuse disorder in the past year. Also at issue is the nation’s heroin and painkiller epidemic, which claims 78 lives each day.

Task Force

Acknowledging that something is wrong with the state of parity enforcement, the White House issued a presidential memorandum creating an interagency Mental Health and Substance Use Disorder Parity Task Force designed to ensure better compliance with the parity rules.  Specifically, the task force was designed to:

  • identify and promote best practices for compliance and implementation;
  • identify and address gaps in guidance, particularly with regard to substance use disorder parity; and
  • implement actions during its tenure and at its conclusion to advance parity in mental health and substance use disorder treatment.

The memorandum also directs the task force to conduct outreach efforts to patients, consumer advocates, health care providers, specialists in mental health care and substance use disorder treatment, employers, insurers, state regulators, and other stakeholders.


Not all states have dropped the enforcement ball. For example, the California Department of Managed Health Care imposed a $4,000,000 administrative penalty on the Kaiser Foundation Health Plan, Inc. in 2013 for parity violations that resulted from mental health service wait times. However, continuing access problems and the creation of the task force suggest that enforcement is the exception rather than the rule.

Beyond parity

Part of the problem is that to meet behavioral health demands, stakeholders need to do more than obtain parity. Based upon that understanding, some lawmakers are pushing for more systemic changes with legislation like The Mental Health Reform Act of 2016, which would assist with enforcement of current requirements (including parity), ensure federal funding to help states provide mental health care services, promote best practices, and increase access. Whichever way is the next step forward, there is little doubt that some action is necessary to improve access to and the provision of behavioral health care.