The Biden administration wants to crack down on private arrangements among some hospitals to reimburse themselves for taxes that help fund coverage for low-income people. It contends the practice violates federal law.
Federal regulators say these arrangements 鈥渁ppear designed to鈥 redirect Medicaid dollars away from facilities that treat the poorest patients to those that 鈥減rovide fewer, or even no, Medicaid-covered services,鈥 according to released May 3 by the Centers for Medicare & Medicaid Services.
The practice is typically orchestrated by the lobbying groups that represent hospitals in state capitals 鈥 and is often kept secret. Not even federal regulators know how widespread it is, although programs operate in at least a few states, including California and Missouri. It鈥檚 also the subject of a Texas lawsuit that could block the federal government鈥檚 proposal.
鈥淚t does seem like these associations are finding a way to distribute the money in a really weird way,鈥 said Joshua Gordon, the director of health policy for the Committee for a Responsible Federal Budget in Washington, D.C. 鈥淏ut without the transparency, we don’t exactly know what’s going on.鈥
Previous efforts to block these payback arrangements have gone nowhere in the face of opposition from the powerful health care industry and state health officials who fear that clamping down could result in less money for Medicaid, the joint state-federal health insurance program for low-income people. Several Medicaid experts predicted the latest proposal could meet the same fate, or face immediate court challenges if adopted.
The federal government鈥檚 sweeping and contentious proposal would require states to police hospitals, nursing homes, and other health care providers to ensure they made no private agreements to redistribute Medicaid dollars.
Public and private hospitals argue CMS has no jurisdiction to regulate private transactions and has overstepped its legal authority. Together with state health officials from around the country, they warn the move could strip billions of federal dollars from Medicaid and threaten safety-net coverage for . Texas alone could lose $6 billion a year, according to Texas Health and Human Services.
麻豆女优 Health News attempted to interview state health leaders and hospital association officials around the country, but they declined to comment or did not respond to repeated calls and emails.
The federal government鈥檚 proposal is part of a broader Medicaid financing package, and it resurrects a long-standing effort by administrations of both parties over the years to rein in Medicaid spending 鈥 which ballooned to $734 billion in 2021.
In this case, regulators are targeting what are known as provider taxes, which states are increasingly imposing on hospitals, nursing homes, and other health care providers to help states pay for their share of the Medicaid program. The more provider taxes states levy, the more money they can also get in federal funding.
These taxes are a critical source of revenue that rely on for their Medicaid programs 鈥 and to get federal matching Medicaid dollars. They account for 17% of state Medicaid funding in 2018, according to a by the Government Accountability Office, which called for more transparency in how the money is collected and spent.
In California, hospitals have redistributed provider tax funds since 2009. Here鈥檚 how it works: Hospitals with a significant share of low-income patients get more Medicaid funding back than they pay in the tax, so they donate a small portion of their Medicaid funding to a charity run by the leadership of the California Hospital Association, a statewide lobbying organization. The charity awards grants to the hospitals that treat a smaller share of low-income patients and don鈥檛 receive as much funding back as they paid in taxes.
For instance, Cedars-Sinai in Los Angeles, one of the country鈥檚 richest hospitals, paid nearly $172 million in provider taxes in 2022, eclipsing the $151 million it got back in Medicaid dollars. Then, it received nearly $28 million from the hospital association鈥檚 charity 鈥 earning about $6.9 million from the program, the hospital鈥檚 show.
Meanwhile, faith-based Adventist Health, which serves a larger share of poor people and operates roughly two dozen hospitals in California, Oregon, and Hawaii, paid $148 million in taxes in 2022 and reaped $401 million in Medicaid dollars through the program, according to its independently . It then contributed $3 million of that Medicaid money to the charity.
Federal law for provider taxes: They must be broad-based and apply to all providers within a certain category, like hospitals; providers within a state must be taxed at the same rate; and taxes can鈥檛 be returned directly or indirectly to providers as part of a 鈥渉old harmless鈥 agreement.
It鈥檚 that last clause that has spurred the feds to act.
Regulators say some health care providers, to gain the needed support within their ranks for the tax, are moving the tax money 鈥 and the federal revenue it draws to states 鈥 among themselves.
鈥淲e believe providers with relatively higher Medicaid volume agree to redistribute some of their Medicaid payments to ensure broad support for the tax program,鈥 they wrote in their proposal.
These agreements 鈥渦ndermine the fiscal integrity鈥 of the Medicaid program, they wrote.
It鈥檚 unclear how widespread such agreements are because hospitals don鈥檛 make them public. CMS said it has identified 鈥渋nstances鈥 of Medicaid redistribution payments, but spokesperson Greg Myers declined to elaborate.
Jonathan Williams, vice president of government affairs at Sutter Health, which operates about 20 hospitals across Northern California, argued in to the federal agency that these arrangements help hospitals expand 鈥渃are networks and afford necessary incentives to ensure that providers can continue caring for Medicaid beneficiaries with unique and specific care needs.鈥
Missouri鈥檚 hospital association also runs a 鈥減ooling arrangement,鈥 in which hospitals that get more Medicaid money than they paid in taxes can donate funds to the hospitals that didn鈥檛.
鈥淢issouri providers have had various private agreements to redistribute funds among themselves for decades, with the full knowledge and approval of CMS,鈥 according to an unsigned and undated from the MO HealthNet Division, which runs the state鈥檚 Medicaid program.
In 2002, Missouri got federal approval for its redistribution program by pledging to use the funds for Medicaid services, whereas California has not received approval.
The federal government鈥檚 plan would require states to get health care providers to attest that they don鈥檛 participate in any arrangement that violates federal law. State officials described the proposal as an impractical administrative burden that could dissuade hospitals, nursing homes, and other providers from participating in Medicaid altogether. 鈥淚mposing additional requirements on providers that participate in Medicaid managed care networks would only serve to further dissuade network participation, which will have a negative impact on member access to care,鈥 Mike Levine, the assistant secretary for MassHealth, Massachusetts鈥 Medicaid program, on July 3.
Texas, which has long tangled with the federal agency over how it funds its Medicaid program, earlier this year after the agency declared in a to states that these types of arrangements aren鈥檛 allowed and must be reported. The letter was sent in February, before the agency issued its formal proposal.
In June, a federal judge handed Texas and its health care industry a victory, the reporting requirement that regulators had outlined in their February letter. The judge agreed with Texas that the agency had exceeded its legal authority and couldn鈥檛 regulate private agreements.
State health officials and hospital leaders are pointing to the Texas court case as evidence that the agency鈥檚 May proposal to crack down on the redistribution of Medicaid funds is a 鈥溾 of the law, as the Tennessee Hospital Association put it in a July 3 letter to CMS.
Federal regulators have not said if or when they will implement their plan. The last time the agency issued a sweeping Medicaid financing proposal, it withdrew it almost a year later.
Mark McClellan, who served as head of the Centers for Medicare & Medicaid Services for two years during the George W. Bush administration, predicted states and Congress would push back hard if the new proposal moved forward.
鈥淢edicaid is a huge component of state spending and keeps getting bigger,鈥 McClellan said. 鈥淪o, sudden CMS changes or clamping down is going to be disruptive for state coverage.鈥
This article was produced by 麻豆女优 Health News, which publishes , an editorially independent service of the .听
