Regulatory Comment Letters

Comment Letter: Medicaid Administrative Issues

Liberty Place, Suite 700
325 Seventh Street, NW
Washington, DC 20004-2802
(202) 638-1100 Phone
www.aha.org

Friday, August 27th 1999

Mr. Chris Jennings
Deputy Assistant to the President
For Health Policy Development
The White House
Washington, DC 20501

Re: Medicaid Administrative Issues

Dear Chris:

We appreciate the recent opportunity to discuss the Medicare issues of concern to the hospital community. At our meeting, we raised a series of Medicaid hospital issues primarily stemming from the Balanced Budget Act of 1997 (BBA). This letter, on behalf of the American Hospital Association (AHA) and the National Association of Public Hospitals and Health Systems (NAPH), identifies the administrative steps that can be taken to address the Medicaid issues that are most pressing to the hospital community. AHA has nearly 5,000 member hospitals and health systems across the country. NAPH represents more than 100 metropolitan area safety net hospitals and health systems. More than 36 percent of all services provided by NAPH members are to people covered by Medicaid.

Administrative rulemaking or guidance on a number of implementation issues would make an important difference to the hospitals and health systems in their efforts to serve significant numbers of Medicaid patients. Further implementation guidance is needed for the State Children's Health Insurance Program (CHIP), Medicaid outreach, Medicaid disproportionate share hospital requirements (DSH), public process for payment rates, and Medicaid managed care. We recommend the Administration:

• Encourage improved data collection and outreach to increase enrollment in the (CHIP);
• Encourage states to improve Medicaid coverage and outreach strategies such as presumptive eligibility and better use of outstationed eligibility workers;
• Change the interpretation of the interaction between CHIP and DSH allotments;
• Require that states submit sufficient data to allow effective monitoring of the DSH program;
• Allow access to DSH reporting data to facilitate monitoring;
• Issue guidance on DSH direct payment provisions and narrowly define exceptions;
• Enforce BBA language on public process for setting payment rates;
• Require health plan identification of Medicaid managed care patients for Medicare and Medicaid DSH eligibility and payment purposes; and
• Issue a final rule on Medicaid managed care.

The Administration and HCFA should encourage improved CHIP and Medicaid outreach and CHIP data collection

We appreciate the Administration's active encouragement of vigorous CHIP and Medicaid outreach and enrollment activities by states, and we are eager to work with you to assist in that effort. There are a number of things that we believe would be helpful. For instance, the Administration could further clarify that the $500 million set aside created as a result of welfare reform can and should be used by the states to encourage outreach and enrollment of both Medicaid and CHIP eligible individuals. We also urge that the Administration assure that this money remains available to states.

The BBA requires states to collect data for the evaluation and monitoring of their CHIP programs. However, data submitted by the states to date, have made it difficult to evaluate the program. We do not believe that states have provided adequate information. In fact, legislation introduced by Senators Moynihan and Chafee, would require better monitoring of state CHIP programs. This legislation would be unnecessary if HCFA required more detailed information on state CHIP programs. We urge HCFA to do just that.

Encourage Medicaid coverage and outreach strategies including presumptive eligibility and better use of outstationed eligibility workers

Medicaid statute contains a number of potential tools that states can use for outreach purposes. The Administration should encourage greater and more effective use of these tools. Presumptive eligibility has existed for pregnant women since the Omnibus Budget Reconciliation Act of 1986 and further options for children were added by the BBA. A study conducted last year by AHA and NAPH together with the National Association of Children's Hospitals (NACH) found very few hospitals aware that states have the option to designate hospitals as presumptive eligibility providers. Only 21 percent of DSH hospitals thought that they were able to offer presumptive eligibility to pregnant women. Clearly, states are not taking advantage of presumptive eligibility as a means of facilitating enrollment in Medicaid. HCFA's assistance in encouraging states to adopt presumptive eligibility would be useful.

Another important tool is the use of outstationed eligibility workers, which is required by Omnibus Budget Reconciliation Act of 1990. HCFA has provided little guidance on the effective use of these eligibility workers, and in fact has very little idea of how effective this requirement has been. In the hospital study we conducted last year, we found that, although compliance with the outstationing requirement was much better among DSH hospitals than among community health centers, it was not universal. The George Washington University Center for Health Services Research and Policy conducted the study on community health centers. Two-thirds of DSH hospitals reported that state or county workers were available to assist with Medicaid applications at the hospital. About 70 percent of DSH hospitals answered that eligibility can be determined at the hospital without having the individual go to the welfare office. While these percentages are high, they indicate that about thirty percent of DSH hospitals, states could be providing greater on-site assistance in facilitating Medicaid enrollment. We encourage HCFA to look more closely at compliance with the outstationing requirement at DSH hospitals.

HCFA Should Correct Problems in its Interpretation of the Interaction Between CHIP and DSH Allotments

In implementing the CHIP program, HCFA has provided guidance regarding the interaction between CHIP and the Medicaid DSH program. In particular, in Question #80 of a HCFA Q&A dated July 29, 1998, HCFA states that "if a State is doing a Medicaid expansion that is also referenced in an approved State child health plan, these children must be counted in the calculation of the hospital specific DSH-limit. DSH payments made for services (either as lump-sum or service specific) rendered to children in the Medicaid expansion group must be claimed at the enhanced FMAP and are counted against the State's Title XXI allotment." This interpretation of the CHIP statute and the DSH statute is incorrect and results in a number of problems.

The HCFA guidance discusses "DSH payments made for services." DSH payments are "payments to hospitals to take into account the situation of hospitals which serve a disproportionate share of low income patients with special needs." 42 U.S.C. § 1396r-4(a)(1). DSH payments do not directly compensate for services. This misconception results in additional problems, including the fact that HCFA requires an enhanced FMAP for CHIP and requires that these amounts be counted against the state's CHIP allotment. The result is that states will spend down their Medicaid federal DSH allotments more rapidly because of the enhanced FMAP and, at the same time, Medicaid DSH payments will negatively affect CHIP allotments. There is no reason to interpret the BBA language to require the double counting against both a state's Medicaid DSH and CHIP allotments. This causes an administrative reduction in DSH spending at a time when our nation's uninsured rate continues to increase and hospitals and states are already facing a $17 billion reduction in federal Medicaid DSH spending through fiscal year 2002 as a result of the BBA.

There is no reason why HCFA cannot change this interpretation. We urge that HCFA adopt revised language clarifying that DSH payments are payments under Medicaid, made at the Medicaid matching rate, and do not count against a CHIP allotment.

HCFA Should Require States to Submit Sufficient Data to Allow Effective DSH Program Monitoring

The BBA requires states to submit a "description of the methodology used by the State to identify and to make payments to disproportionate share hospitals, including children's hospitals, on the basis of the proportion of low-income and medicaid (sic) patients served by such hospitals." It also requires states to submit annual reports "describing the disproportionate share payments to each such disproportionate share hospital." Balanced Budget Act of 1997, § 4721 (42 U.S.C. § 1396r-4(a)(2)(D)).

HCFA's current interpretation of these provisions, as contained in its October 8, 1998 notice (63 Fed. Reg. 54142), is not sufficient to allow for adequate monitoring of state DSH programs. HCFA has interpreted the first requirement as simply a restatement of the requirement that the DSH plan be contained in the state plan. With regard to the reporting requirements, HCFA has requested only the bare minimum of data - i.e. data on gross DSH expenditures by hospital and hospital type. In fact, HCFA does not even require such data be provided; the notice merely recommends that the reporting include these data.

Before and after the October 8, 1998 notice, AHA and NAPH repeatedly asked HCFA to collect more extensive data, both in terms of methodology and annual reports of state experience. In particular, NAPH recommended collection of seven specific key data elements, including (1) total DSH funds received by each hospital, (2) total intergovernmental transfer payments made (or amounts certified as eligible public expenditures) by each hospital, (3) provider tax payments by each hospital, (4) proportion of Medicaid revenues (without DSH) or charges as a percent of total revenues or charges, (5) proportion of charity care charges as a percent of total charges, (6) Medicaid revenues minus Medicaid costs for each hospital, and (7) indigent care revenues minus indigent care costs for each hospital. Congress intended that the disclosure and annual reporting requirements help safeguard appropriate use of federal funds for DSH hospitals. Lack of good national data was and continues to be a barrier to ensuring that the program is used for the purpose intended. The data elements above would be sufficient to allow such monitoring. The current data are not sufficient. HCFA has existing authority to collect all of the data elements mentioned above.

NAPH has begun to analyze some of the data submitted as a part of the reporting requirement for about half the states. The data was collected by the Center on Budget and Policy Priorities. There are no national reporting standards. States do not identify hospitals very well - in some cases using acronyms or initials. There are no unique identifiers - some states provide Medicaid numbers, others provide no identifying numbers. In one instance a state did not identify individual hospitals, but grouped dollars by type of hospital, which is not consistent with the statutory requirement. In a number of states, the type of hospital was not specified. Thus, even with the minimal data requested by HCFA, compliance by states is spotty and the ability to provide proper monitoring and oversight of the Medicaid DSH program is limited. Using a standard national number like the Medicare provider number would be helpful.

HCFA, in its October 8, 1998 notice, left open the possibility that it would change the annual reporting requirements. We urge HCFA to do so, otherwise, the data reporting requirement will continue to be a meaningless exercise. We would be pleased to work with you on improving the type of data collected.

HCFA Should Allow Access to DSH Reporting Data to Facilitate Monitoring

As described above, the BBA required, and HCFA has implemented, some data reporting requirements associated with the Medicaid DSH program. However, HCFA has made it extremely difficult for private parties to obtain these data for the very purpose intended by Congress: monitoring state use of federal DSH monies. Particularly since HCFA is not to our knowledge doing any public analysis of the state submissions regarding DSH, access to these data by private parties is essential.

HCFA has not been eager, or in fact willing, to share state submissions on DSH required by the BBA. In fact, although HCFA recognizes that these submissions are public documents, HCFA has required that interested private parties submit Freedom of Information Act (FOIA) requests that can take many months to process. There is no reason for HCFA to be so reticent regarding these documents. HCFA has been much more willing to share other information submitted by states, such as waiver requests. The submissions required by the BBA are public information for which disclosure is necessary to facilitate monitoring of public funds. We urge that HCFA share these submissions without requiring FOIA requests.

HCFA Should Issue Guidance on DSH Direct Payment Provisions and Narrowly Define Exceptions

The BBA requires that states make DSH payments for Medicaid managed care patients directly to hospitals rather than including them in capitation payments made to managed care organizations (MCOs). Balanced Budget Act of 1997, § 4721(d) (42 U.S.C. § 1396r-4(i)). An exception was included for "payment arrangements" in effect on July 1, 1997. Both AHA and NAPH have urged that the term "payment arrangement" be interpreted narrowly to apply only to contracts, and thus the direct payment provisions would apply upon expiration or renewal of the contract.

To date, HCFA has not issued any guidance regarding the direct payment provisions, although there were indications that HCFA had originally intended to issue guidance in the October 8, 1998 notice mentioned above. HCFA's failure to issue any guidance on this issue permits a broad interpretation of the direct payment provision, thus effectively nullifying Congress' intent in requiring that states pay DSH payments to hospitals directly. We urge that HCFA address this issue and adopt the narrow definition that most effectively implements Congress' intent and assures that hospitals receive the payments intended for them.

HCFA Must Enforce Language in the BBA Regarding Payment Rates

While Section 4711 of the Balanced Budget Act repealed the Boren Amendment, the BBA replaced these requirements with certain public process requirements. These include publishing the proposed rates; giving the providers, beneficiaries and others a reasonable opportunity to review and comment on the proposed rates and methodologies; publishing the final rates, methodologies and justifications; and making sure the rates take into account the situation of hospitals which serve a disproportionate share of low-income patients with special needs. Balanced Budget Act of 1997 § 4711, 42 U.S.C. § 1396a(13)(A).

We are disappointed by HCFA's position on these new requirements. HCFA, through its December 10, 1997 letter to State Medicaid Directors has basically abrogated any enforcement responsibility for these requirements by relying on state attestations. For example, HCFA does not even view written publication of the rates, methodologies and justifications to be necessary, and allows mere hearings or commission meetings to be sufficient. This is plainly inconsistent with the statute. Because of HCFA's failure to enforce these provisions, there is no assurance that states will meet the minimal requirements now in place. We urge HCFA to assume a more responsible role in getting states to comply with the payment rates requirements.

HCFA Should Require Health Plan Identification of Medicaid Managed Care Patients for Medicare and Medicaid DSH Eligibility and Payment Calculation

The BBA encouraged expansion of Medicaid managed care. However, the volume of Medicaid patients seen by a hospital determines both eligibility, and in many cases, payment for both the Medicaid and Medicare DSH programs. As more states adopt managed care programs for their Medicaid programs, it is increasingly difficult for hospitals to identify managed care patients as Medicaid patients. AHA and NAPH are concerned that the inability of hospitals to identify Medicaid patients is resulting in improperly deflated DSH payments. Although the BBA encouraged the development of Medicaid managed care, it did not intend to make it more difficult for hospitals to identify Medicaid patients for the purpose of their DSH data collection responsibilities. Thus, we urge HCFA to issue guidance requiring state Medicaid programs and Medicaid managed care plans to facilitate the hospital identification of Medicaid patients.

HCFA Should Issue a Final Rule on Medicaid Managed Care

BBA made significant changes in Medicaid managed care. Nearly 11 months ago, HCFA issued a proposed rule to implement these provisions. Both AHA and NAPH commented on this proposed rule. A final rule is now necessary to provide effective guidance (and safeguards) for the significantly increased flexibility provided states under the BBA.

In particular, both AHA and NAPH believe that the rule needs strengthening in the area of emergency services. Although the proposed rule stated in the preamble that MCOs must pay for the cost of emergency services obtained by Medicaid enrollees, the regulatory language did not emphasize this requirement and should echo the statutory language. In addition, better regulatory language is needed regarding implementation of the prudent layperson standard. We have heard numerous reports of health plans ignoring prior authorization prohibitions and the prudent layperson requirement, as well as engaging in other practices that undermine the intent of the statute.

NAPH and AHA also believe that the default assignment provisions under the proposed Medicaid managed care need further attention. The BBA requires states to have a default enrollment process that takes into consideration existing provider-individual relationships and relationships with providers that have traditionally served Medicaid beneficiaries. HCFA's proposed rule defined existing provider-individual relationships too narrowly, looking back only one year and effectively penalizing provider-individual relationships that have kept a Medicaid beneficiary healthy over a longer period of time. We urge HCFA to lengthen the review period to properly determine the existence of such relationships. Further, in regard to the definition of traditional provider relationship, we urge HCFA to consider a definition more reflective of these existing relationships.

The absence of a final rule on Medicaid managed care makes it difficult to assess the effect of the BBA in expanding state options regarding Medicaid managed care. The above examples are only two small examples of where HCFA needs to provide additional guidance. We urge HCFA to adopt a final rule that incorporates the changes recommended above and in our prior comments.

AHA and NAPH appreciate the opportunity to draw your attention to these important issues. We hope and look forward to working with you to develop these and other potential solutions to the Medicaid problems confronting our members. If you have questions about this letter, please contact Charles Luband at 202/624-7215 or Molly Collins at 202/626-2326.

Sincerely,

Rick Pollack
Executive Vice President
American Hospital Association

Larry S. Gage
President
National Association of Public Hospitals and Health Systems

cc: John Podesta, Mike Hash (HCFA)