Medicare and Medicaid fee-for-service issued an estimated $27.5 billion in improper payments in fiscal year 2017, according to a GAO report, which issued four recommendations.
Differing documentation requirements between Medicare and Medicaid may be clouding the government's ability to assess and improve each program's operation, according to a Government Accountability Office report published Wednesday.
Although the two programs pay for similar care, Medicare's documentation requirements are generally more extensive than Medicaid's for certain services, such as those that involve physician referrals, the GAO report states.
The Centers for Medicare & Medicaid Services uses these documentation requirements in determining whether an individual payment was improper, then CMS estimates total improper payments based on these individual cases and uses that information to inform its strategies to reduce such improper payments in the future. But CMS officials haven't assessed how the differing requirements between the two programs may affect their perceptions of each program's risks, the report states.
"Without a better understanding of how documentation requirements affect estimates of improper payments, CMS may not have the information it needs to effectively identify and analyze program risks, and develop strategies to protect the integrity of the Medicare and Medicaid programs," the GAO report states.
The report found that Medicare fee-for-service issued an estimated $23.2 billion in improper payments due to insufficient documentation in fiscal year 2017, while Medicaid fee-for-service issued $4.3 billion in improper payments due to insufficient documentation.
The CMS officials interviewed by the GAO reportedly said any differences in the documentation requirements between the two programs results from each state's involvement in jointly managing its own Medicaid program.
The GAO report includes four recommendations:
The CMS administrator should institute a process to routinely assess the necessity and efficacy of Medicare and Medicaid documentation requirements. Health and Human Services concurred with this recommendation in a response letter earlier this month and said HHS has already established this process.
The CMS administrator should ensure Medicaid medical reviews provide actionable information on improper payments. HHS declined to concur with this recommendation. Using data from other sources to adjust state-specific program risks to adjust the Payment Error Rate Measurement (PERM) sampling approach "could jeopardize the statistical validity of the PERM program," HHS wrote.
The CMS administrator should minimize the potential for PERM medical reviews to compromise fraud investigations. HHS concurred with this recommendation and said it already provided guidance last year to states and will consider clarifying that guidance in the future.
The CMS administrator should address disincentives for state Medicaid agencies to notify the PERM contractor of providers under fraud investigation. HHS concurred with this recommendation and said it will consider increasing educational for states.
The HHS secretary keeps trying to advance Medicaid objectives that aren't rooted in the law itself, the judge ruled.
The same federal judge who blocked Medicaid work requirements from taking effect in Kentucky nine months ago did so again on Wednesday, and he struck down similar requirements for Arkansas as well.
D.C. District Court Judge James E. Boasberg granted summary judgment in favor of the Medicaid beneficiaries who sued to block each state's Medicaid waiver, which the Trump administration approved as part of a push to embrace what it describes as "community engagement" requirements.
A central objective of the Medicaid program is to provide healthcare to needy populations, but the Health and Human Services secretary "continues to press his contention that the program promotes his alternative proposed objectives of beneficiary health, financial independence, and fiscal sustainability of Medicaid," Boasberg wrote, determining that the first two of those three goals are not rooted in the Medicaid Act.
Boasberg found that HHS failed to adequately consider what effect the policy would have on coverage, so he vacated HHS' approval of each state's Medicaid waiver, sent the matter back to HHS for further proceedings, and ordered the parties to appear for an April 10 status hearing.
The lawsuits challenging each state's new requirements—Stewart v. Azar in Kentucky and Gresham v. Azar in Arkansas—were brought with help from the National Health Law Program and other organizations. A similar lawsuit involving some of the same groups, Philbrick v. Azar, was filed just last week to challenge Medicaid work requirements in New Hampshire as well. (No decision has been issued in the Philbrick case, which is also before Boasberg.)
Those who support imposing work requirements on Medicaid beneficiaries have argued that they help people climb out of poverty and improve their financial independence. Those who oppose such requirements have argued that they are designed to reduce the Medicaid-eligible population.
In addition to Kentucky, Arkansas, and New Hampshire, there are five other states with Medicaid waiver approvals that include work requirements: Arizona, Indiana, Michigan, Ohio, and Wisconsin. At least nine more have requests for such waivers pending.
The ultimate goal is to help healthcare organizations improve quality and balance their limited resources with AI-driven data feedback that makes sense to clinicians.
A new competition announced Wednesday by the Centers for Medicare & Medicaid Services offers a grand prize of $1 million to the innovators who best demonstrate how artificial intelligence can be used to predict unplanned admissions and other adverse events.
The ultimate goal of the three-stage CMS AI Health Outcomes Challenge is to help healthcare organizations improve quality and balance their limited resources with AI-driven data feedback that makes sense to clinicians, according to the CMS announcement. The idea is that the Centers for Medicare and Medicaid Innnovation (CMMI), also known as the CMS Innovation Center—which was established by a Social Security Act amendment that was rolled into the Affordable Care Act—may use some solutions in testing new payment and delivery models.
The challenge is born of a partnership with the American Academy of Family Physicians (AAFP) and the Laura and John Arnold Foundation, CMS said.
There are three stages:
Launch stage: Participants submit applications via ai.cms.govuntil 5 p.m. ET on June 18, 2019. Up to 20 participants will be selected to move on to the next stage, CMS said.
Stage 1: Participants will use Medicare claims data sets to design and test proposed solutions between summer and fall 2019. Up to five will win $80,000 apiece and be selected to move on to the next stage.
Stage 2: Finalists may request more Medicare claims data and refine their projects from winter 2019 through spring 2020. The runner-up will win up to $250,000, and the grand prize of up to $1 million will go to the winner overall in April 2020 (though dates may change).
The administration has been building some of its initiatives on a legal footing that it now argues is completely invalid.
Republicans have ceaselessly called for the Affordable Care Act to be repealed and replaced since its passage nine years ago, and President Donald Trump has carried that mission from the campaign trail into the White House. That much is obvious.
What may be less obvious is the extent to which the healthcare policymaking agenda touted by Trump's own administration hinges on legal authorities established by the ACA itself. Certain programs intertwine with the ACA in ways that are especially relevant now that the Department of Justice has said it won't defend even a single provision of the sprawling Obama-era law.
While members of Trump's health policy team may merely have been doing their best to operate within an inherited legal framework, they have invested considerable time, energy, and resources into programs that would be invalidated with the rest of the ACA, if the DOJ gets its way.
Ashley Ridlon, MSc,who is vice president of health policy for Evolent Health and was a field director for the Center for Medicare & Medicaid Innovation (CMMI) during the Obama administration, says the Trump administration has taken some programs created by the ACA in a different direction—such as CMMI's latest value-based payment models or the Medicare Shared Savings Program's more aggressive path to two-sided risk—while still relying on the ACA for their statutory authority.
"Whether they like the origin or not, they are working in these programs," Ridlon tells HealthLeaders.
Timothy S. Jost, JD, professor emeritus at the Washington and Lee University School of Law in Lexington, Virginia, says the political debate is overlooking many of the ACA's consequential but lesser-known provisions.
"I think that the Trump administration is focused—as are many people, generally—on the private insurance reforms, the exchanges, the protections added to private insurance and the exchanges," Jost tells HealthLeaders. "But there's a whole lot more in the Affordable Care Act, and the effect of repealing it would be just huge."
Macro-level impacts on nationwide coverage rates aside, invalidating the following ACA-related items could be especially consequential to key pieces of the Trump administration's own healthcare agenda:
Experiments in value-based payment models: The ACA created CMMI, also known as the CMS Innovation Center, to help nudge U.S. healthcare toward a value-based system. Trump administration officials bashed the Obama administration's CMMI strategy last summer, then they named a new CMMI director, Adam Boehler, to take the center in a new direction.
Since then, Health and Human Services Secretary Alex Azar has excitedly teased the potential benefits of forthcoming CMMI models, and the Centers for Medicare & Medicaid Services has used CMMI models to address a number of the administration's priorities, including interoperability of electronic health information for patients, maternal opioid misuse, and more. But the statutory authority on which all of that is based would go away if the ACA is invalidated in its entirety.
Efforts to reduce drug costs through biosimilars: The ACA gave authority to the Food and Drug Administration for a shorter path to approval for biosimilars, or generic biologics. "That has been, as I understand it, a fairly big part of the FDA's agenda under the Trump administration," Jost says.
FDA Commissioner Scott Gottlieb, MD, unveiled a "Biosimilar Action Plan" last summer to put downward pressure on drug prices by increasing competition. The plan makes no mention of the ACA by name, but it does mention the Biologics Price Competition and Innovation Act (BPCI Act), which was rolled into the ACA to establish an abbreviated pathway for approvals of biosimilar and interchangeable products. Congress could, of course, reauthorize the BPCI Act as a standalone item if it were invalidated with the rest of the ACA, but that would require a level of political will that is far from certain.
Healthcare reforms for native Americans: The ACA also incorporated the Indian Health Care Improvement Act (IHCIA), which authorized appropriations without an expiration date and included several updates from the previous version passed in 1976. Those changes gave the Indian Health Services (IHS) director more authority; allowed tribes and their organizations to buy health benefits for IHS beneficiaries; directed the IHS to establish comprehensive programs for behavioral health, prevention, and treatment; and more, according to a 2010 IHS announcement.
Expanded treatment for HIV/AIDS and opioid addiction: During his State of the Union address last month, Trump set the bold goal of ending the HIV/AIDS epidemic in the U.S.within a decade, and Trump administration officials have repeatedly vowed to combat the opioid epidemic by expanding and enhancing access to treatment options. But treatment for each of these conditions relies heavily on Medicaid, and invalidating the ACA's Medicaid expansions would undercut efforts to offer more and better treatment, Jost says.
Protections for people with preexisting conditions: Trump and fellow Republicans claimed during campaigns for last fall's midterm elections that they want legal protections to ensure that people with preexisting medical conditions have access to health insurance. But their legislative proposals—which have generally offered less protectionthan the ACA does—have thus far failed to muster sufficient backing on Capitol Hill, so invalidating the ACA would leave Americans without some of the protections they have come to expect.
Invalidating the entire ACA on appeal could disrupt the Trump administration's own agenda, but the disruption could be minimized by swift legislative action, Ridlon says.
"It could potentially hamstring their efforts to advance value if these programs were to go away, at least in the near term until Congress can reinstate them," she says.
Spokespeople for HHS, CMS, IHS, and FDA referred HealthLeaders' questions to the DOJ, which responded to questions with a short statement that did not answer them.
Political Fallout
The DOJ's shift in position has been criticized not only by Democrats but also by hospital groups and some Republicans. House Minority Leader Kevin McCarthy told Trump that he disagreeswith the DOJ's new position, Axios reported, citing unnamed sources.
Sen. Susan Collins, R-Maine, told Axios on the record that she's "surprised" and "appalled" by the DOJ's shift on the ACA case.
Politico's Eliana Johnson and Burgess Everett reported that Azar and Attorney General William Barr had objected to the DOJ's shift in position, which was driven by the White House. Azar reportedly noted during a meeting late last year that Republicans didn't have anything to put in the ACA's place, though HHS refuted Politico's report of a dispute.
Trump, who is reportedly "relieved" by news of Barr's summary of Special Counsel Robert Mueller's report, seems to see Republican leadership on healthcare reform as a winning issue, even as others in his party worry Democrats have an edge in this territory.
"The Republican Party will become 'The Party of Healthcare!'" he wrote Tuesday in a tweet.
Democrats, meanwhile, have spotted the DOJ's shift as an opening to renew their emphasis on healthcare policy talk.
After previously arguing that most of the sprawling healthcare legislation should stand, even if its individual mandate falls, the DOJ changed course.
The U.S. Department of Justice signaled in a court filing Monday evening that its position on the validity of the Affordable Care Act has shifted.
The DOJ had argued in District Court proceedings last fall that most of the sprawling healthcare legislation should remain intact, even if the ACA's individual mandate were to be struck down in light of Congress zeroing out its tax penalty. Only the ACA's community-rating and guaranteed-issue provisions—which protect consumers with preexisting conditions—should fall with the mandate, the DOJ had argued.
District Judge Reed O'Connor's decision last December went much further than the DOJ had urged, declaring the entire ACA invalid, as the Texas-led coalition of plaintiff states had requested. Now that an appeal is pending at the Fifth Circuit, however, the DOJ has decided that it agrees with the plaintiffs' argument and O'Connor's decision after all.
The revelation came in a short letter signed by Assistant Attorney General Joseph H. Hunt, Deputy Assistant Attorney General Brett A. Shumate, and DOJ Civil Division appellate staff attorney Martin V. Totaro. It also came less than six weeks after Attorney General William Barr's swearing-in.
Barr had said during his confirmation hearing that he would "reconsider" the DOJ's position on the ACA suit. "I don't think this is what the Senators questioning him had in mind," Jonathan H. Adler, JD, director of the Center for Business Law & Regulation at Case Western Reserve University School of Law in Cleveland, wrote in a tweet Monday.
Adler, who has opposed the ACA in the past, said the DOJ's shift to this new position is "astounding" and legally unsound. This is a case in which the DOJ owes a duty to defend federal laws that are readily defensible, he argued in a blog post, adding that politics may be to blame.
"I was among those who cheered the selection of William Barr as Attorney General and hoped his confirmation would herald the elevation of law over politics within the Justice Department," Adler wrote. "I am still hopeful, but this latest filing is not a good sign."
University of Michigan law professor Nicholas Bagley, JD, who cosigned an amicus brief with Adler and others for this lawsuit, wrote in a blog post that this latest shift by the DOJ should not be mistaken for "business as usual."
"This is far beyond the pale," Bagley wrote. "And it is a serious threat to the rule of law."
While the plaintiff states and federal government defendants now agree that the entire ACA is invalid, a California-led coalition of Democratic states and the Democrat-controlled U.S. House of Representatives have intervened in the case to argue that the entire law should be upheld.
Legal wrangling aside, if the DOJ's new position ultimately prevails, canceling the ACA would bring significant and far-reaching real-world implications for the U.S. care delivery system. Not only would the ACA exchanges disappear, but Medicaid expansion in 36 states, plus D.C., would vanish as well. The number of uninsured people in the U.S. would increase by an estimated 19.9 million, according to an Urban Institute report released this month. Furthermore, the federal government would lose authorization to test out new payment models, which the Trump administration itself has been using.
Judges at the Fifth Circuit could affirm or reject the logic of O'Connor's decision, but they are not necessarily locked into a binary outcome that either upholds or strikes down the ACA in its entirety. The California-led coalition of states intervening in the lawsuit acknowledged as much in their opening brief filed Monday. Even if the judges determine that Texas and its fellow plaintiff states have standing to sue and that the ACA's individual mandate is unconstitutional—two points that the California-led intervenors dispute—they should strike down the mandate only and leave the rest of the law intact, the intervenors argue.
"By reducing the amount of the alternative tax imposed by [the mandate] to zero, Congress eliminated the only potential consequence for choosing not to maintain healthcare coverage," they wrote. "At the same time, it left every other provision of the ACA in place. In these unique circumstances, there is no need to hypothesize about whether Congress 'would have preferred' to preserve the rest of the ACA if it had known that the minimum coverage provision could not be enforced. ... That is the exact situation that the 2017 Congress itself created. In other words, in this case we already know—for certain—that Congress would 'have preferred what is left' of the ACA to 'no [Act] at all.'"
Editor's note: This story was updated Tuesday, March 26, 2019, with additional information.
Michigan officials say they're reviewing only one application, from Beaumont Health, because Henry Ford's application didn't adhere to administrative rules.
Two health systems in Michigan have asked state officials to authorize their competing plans to build a hospital in Oxford, a village about 40 miles north of Detroit.
Only one of the systems can be chosen, pursuant to Michigan's certificate of need (CON) law, and the deciding factor could come down to how well each competitor adhered to administrative rules stemming from the law. The case highlights a long-running dispute over how much the state and federal government should do to influence healthcare competition and whether that interference is beneficial.
Henry Ford Health System, based in Detroit, and Beaumont Health, based in Dearborn, each submitted an application to the Michigan Department of Health and Human Services after a biennial review of the state's hospital needs last fall identified the Oxford area as among six "limited access areas" across the state, as The Detroit News' Breana Noble reported. The review determined the Oxford area lacked 117 hospital beds.
Henry Ford proposed to build a 116-bed hospital, and Beaumont proposed to build a 117-bed hospital. But there was a problem with Henry Ford's application. It didn't adhere to all of the state's administrative rules, a department spokesperson told local media.
Beaumont's application did follow all of the rules, so it is currently under review, as the spokesperson told the Detroit Free Press' JC Reindl. Henry Ford can reapply in the future, but if the state authorizes Beaumont's plan, it would preclude Henry Ford from building an Oxford hospital.
The department accepts certificate-of-need applications on only three days per year: once each in February, June, and October, as The Detroit News reported.
A spokesperson for Henry Ford pushed back a bit against the state's determination, saying the Detroit-based system will continue to speak with state regulators about its application.
"We did in fact submit a (certificate of need) application by the Feb. 1 deadline, and [we] are confident that the state will have strong interest in our approach to meeting the needs of the community," the spokesperson told the Free Press.
"States initially adopted CON laws to further laudable policy goals, including cost control and access to care. The evidence to date, however, suggests that CON laws are frequently costly barriers to entry for healthcare providers rather than successful tools for controlling costs or improving healthcare quality," the administration said in a report last December, noting that the Federal Trade Commission (FTC) and the Department of Justice Antitrust Division had already advised states to curb their CON laws.
A federal law passed in 1974 prompted states to enact CON laws. At one point, every state but Louisiana had done so, according to the National Conference of State Legislatures (NCSL). The federal law was repealed, however, in 1987, and states began modifying or repealing their CON laws as well.
But there are still 35 states with some form of CON program on the books.
A push to repeal Florida's CON law stalled this week, as the South Florida Sun Sentinel reported.
The National Health Law Program, which helped plaintiffs challenge similar requirements in Arkansas and Kentucky, have added New Hampshire's so-called 'community engagement' requirements to their hit list.
While they wait for a federal judge to decide whether Medicaid work requirements in Arkansas and Kentucky are legal, some of the same people involved in those two cases filed a third action Wednesday to challenge Medicaid work requirements in New Hampshire.
Jane Perkins, legal director for the National Health Law Program, said Congress gave the HHS secretary authority to waive some provisions of the law when such waivers would advance the Medicaid program's objective: to furnish medical assistance.
"We filed this case because the federal government ignored these limits in its effort to fundamentally transform Medicaid and 'explode' the Affordable Care Act's expansion of health coverage for medically necessary services that low-income adults need," Perkins said in a statement. "This approval will not promote coverage, but it will result in significant coverage losses, and that is the administration's goal—to weaken the Medicaid program and cull people whom it deems unworthy from it."
A spokesperson for the Centers for Medicare & Medicaid Services declined to comment on matters of pending litigation, but CMS Administrator Seema Verma has said in the past that Medicaid work requirements are a tool to help beneficiaries rise out of poverty. In a blog post last week, Verma said such requirements may "help families break cycles of generational poverty and improve their health and financial independence more than just handing out a Medicaid card."
A spokesperson for HHS did not immediately respond Wednesday to HealthLeaders' request for comment.
When an attorney for the federal government argued last week that the work requirements would provide an incentive for people to improve their lives and find work, U.S. District Judge James Boasberg in the D.C. District Court reportedly interjected, "That is not the purpose of Medicaid."
A spokesperson for New Hampshire Gov. Chris Sununu said the lawsuit is an attempt by "a partisan national organization" to "undo a bipartisan agreement by New Hampshire lawmakers," as The Concord Monitor's Ethan DeWitt reported. The state, which wasn't named as a defendant, is mulling whether to intervene in the case, the spokesperson reportedly added.
The lawsuit comes as the Trump administration has continued approving similar requirements in other states, most recently in Ohio. Waivers for Medicaid work requirements have been granted to eight states: Arizona, Arkansas, Indiana, Kentucky, Michigan, New Hampshire, Ohio, and Wisconsin. Waiver requests are pending for at least nine others: Alabama, Kansas, Mississippi, Oklahoma, South Carolina, South Dakota, Tennessee, Utah, and Virginia.
HHS Secretary Alex Azar drew scrutiny for suggesting in a congressional hearing last week that the 18,000 beneficiaries booted from the Arkansas Medicaid program under that state's newly implemented work requirements had likely found jobs.
Analysis released Tuesday by the Center on Budget and Policy Priorities contradicted Azar's suggestion. Only 1,981 of the Arkansans who lost coverage for not meeting the work requirement had matches in the state's New Hire Database, which indicates that they had found employment.
"That means that for the more than 16,000 others who lost coverage, there is no evidence that they found new work," CBPP Senior Policy Analyst Jennifer Wagner wrote, adding that finding employment doesn't necessarily mean finding health insurance.
Dawn McKinney, policy director for New Hampshire Legal Assistance, said in the statement announcing the latest lawsuit that New Hampshire beneficiaries are worried their state, too, will soon see drops in enrollment like those documented in Arkansas and anticipated in Kentucky.
"This new policy, which includes ending retroactive health coverage, adds more confusing and burdensome requirements for families struggling to make ends meet," McKinney said.
New Hampshire's work requirements, which were approved last May, apply to adults who gained coverage from Medicaid expansion under the Affordable Care Act, with some exceptions.
The decision to leave the agency did not come easily, but the commissioner said he feels good about where things are headed and who's in charge.
Scott Gottlieb, MD, the outgoing commissioner of the Food and Drug Administration, expressed confidence Tuesday in where the agency is headed as he prepares to leave his post in the coming weeks, having served nearly two years with the Trump administration.
During a moderated discussion at the Brookings Institution in Washington, D.C., Gottlieb affirmed earlier reports that he decided to resign, as announced earlier this month, to spend more time with his family. Gottlieb has been commuting to D.C. from their home in Westport, Connecticut, leaving very little time with his children.
Despite the clarity of his reasoning, the decision to leave the FDA did not come easily, Gottlieb said.
"This is the best job I'll ever have," he added.
Gottlieb said the agency's team is competent and prepared to keep rolling out a robust policy agenda in his absence.
"I feel very good about the inflection point that FDA is at right now, stepping away from that," he said, adding that he wouldn't be leaving now if he weren't so sure the FDA would continue to succeed.
Gottlieb said he's "a big fan" of National Cancer Institute Director Norman E. "Ned" Sharpless, MD, who will be named acting FDA commissioner and is said to be in the running to serve as Gottlieb's permanent successor, as The Wall Street Journal's Thomas M. Burton reported last week.
Gottlieb said he's planning to testify before Congress on Wednesday, April 3, about the budget proposal for fiscal year 2020, then serve his final day as FDA commissioner on Friday, April 5. (After that? He's planning a trip to Disney World with his kids.)
Government Shutdown Fallout
There were rumors in January that Gottlieb's resignation was imminent, amid a partial government shutdown that shuttered core functions of the FDA for 35 days, but Gottlieb said Tuesday that he would not have left FDA in such a state.
When asked about the shutdown, which stemmed from a dispute between President Donald Trump and Congress over Trump's demand for billions of dollars in funding for a southern border wall, Gottlieb said the ordeal was a major setback for the FDA's progress.
"In my view, this was the biggest operational challenge we faced in modern times in my observance of the agency over the last two or three decades," Gottlieb said. "We've faced operational challenges, but they were in a discrete area of activity. This was across the board."
Gottlieb said the FDA has recovered "admirably" from the shutdown but will likely finish 2019 about 5%-10% behind on routine drug and device inspections. And there could be longer-term negative impacts if the shutdown tarnishes the way FDA workers view their government service, he said.
Impediments to Biosimilars
The FDA unveiled a biosimilar "action plan" last summer that aims to promote drug affordability through competition. But there are still major hurdles, including a commercial impediment, Gottlieb said.
Health plans have a tough time getting physicians and patients to switch to biosimilars, and health plans are hesitant to move away from the big rebates name brand drug manufacturers can offer, he said, arguing that health plans would reduce their overall drug spend in the long run if they pushed toward biosimilars in the near term.
Some predictions in the early 2000s were a bit bold in how quickly and deeply biologics would penetrate the market, Gottlieb said. Even so, he's still optimistic.
"I think as the market develops, as doctors gain more acceptance and comfort with biosimilars, as more biosimilars are developed against chronic therapy biologics—where I think there will be more clinical comfort in converting patients over to them—I think this market is going to evolve and be very robust," he said. "It's been slow to develop, but it hasn't surprised me that it's been slow to develop."
While insurers and hospitals alike see balance billing as a problem, they disagree on its causes and solutions.
Seventeen organizations representing some of the nation's largest health insurers sent a letter Monday to congressional leaders, calling for legislation that would prohibit providers from sending surprise medical bills to patients for emergency services when the patients didn't have a choice on where to receive care.
The letter, signed by America's Health Insurance Plans (AHIP) and others, urges lawmakers also to pass policies that would set reimbursement rates based on what insurers pay similar doctors in a given geographic area or a Medicare percentage.
"A significant driver of high costs are exorbitant bills that millions of patients with comprehensive insurance coverage receive every year, demanding arbitrary fees for treatment by certain specialty medical doctors they did not seek out for care and, often, never even knew treated them," they wrote.
The letter caught immediate blowback from the American Hospital Association (AHA) and Federation of American Hospitals (FAH), which argued in a joint statement that, while patients should not be subjected to balance billing, insurers and providers must keep their ability to negotiate over payment rates.
"Not only is it a dangerous precedent for the government to start setting rates in the private sector, but it could also create unintended consequences for patients by disrupting incentives for health plans to create comprehensive networks," AHA President and CEO Rick Pollack and FAH President and CEO Chip Kahn said in the statement.
Pollack and Kahn noted that hospitals had already proposed their own plan to protect consumers from surprise bills.
Related: Give Your Patients This HFMA Guide to Help Them Avoid Surprise Medical Bills
While insurer groups argue providers are largely to blame for surprise bills, the hospital groups have pointed blame back at insurers. Pollack and Kahn said last December that health plans have maintained inadequate provider networks for emergency care leading to "one of the root causes of surprise bills."
This week's tit-for-tat comes as public awareness and political pressure rise around surprise medical bills. Half of the states have enacted a patchwork of protections, though only nine have "comprehensive protections," according to a January report by the Commonwealth Fund.
Meanwhile,potential legislative solutions are garnering rare bipartisan support on the federal level, and President Donald Trump has asked his administration to look for a fix.
The report urges lawmakers to adjust the planned rollout of DSH payment reductions and require HHS to devise a new methodology for calculating those payments.
If lawmakers move forward with planned cuts to disproportionate share hospital (DSH) payments, they should consider phasing them in gradually and applying them first to states with unspent DSH funding, the Medicaid and CHIP Payment and Access Commission (MACPAC) said in its latest report to Congress.
The 150-page report, released Friday, also recommended that Congress have Health and Human Services come up with a new methodology for calculating DSH allotments, so each state would receive an amount that better reflects its number of non-elderly low-income people.
"For several years, MACPAC's analyses have shown that the DSH allotment formula bears little resemblance to a state's need for DSH funding, since it's based on historical patterns of spending going back to the 1990s," said MACPAC Chair Penny Thompson, MPA, in a statement. "If these reductions go into effect, we recommend that Congress take this opportunity to move toward a more equitable funding distribution."
The DSH payment cuts are planned to take effect October 1 as required by the Affordable Care Act, which made the cuts on the assumption that a growing insured population would result in declining uncompensated care for hospitals, as Thompson wrote in the report's opening letter to congressional leaders. The cuts were initially planned for fiscal year 2014, but they have been postponed several times.
"Although uninsurance has declined since the ACA went into effect, hospitals, particularly those serving low-income communities, continue to experience high levels of uncompensated care," Thompson wrote. "Although we are concerned that the magnitude of DSH cuts assumed under current law could affect the financial viability of some safety-net hospitals, over the past year, the Commission has focused on budget-neutral ways to restructure funding under current law."
Furthermore, new data analysis in the report shows that the Medicaid shortfall being shouldered by hospitals is growing, even as charity care and bad debt are on the decline, the MACPAC statement notes.
The three key DSH-related recommendations in the report's first chapter are as follows:
Phase the cuts in gradually. If lawmakers choose to proceed with DSH cuts, they should plan $2 billion in cuts for fiscal year 2020, $4 billion for fiscal year 2021, $6 billion in fiscal year 2022, and $8 billion in fiscal years 2023-2029, the MACPAC report states. (Under current law, the DSH cuts are $4 billion in fiscal year 2020 and $8 billion in fiscal years 2021-2025.)
Target unspent funds first. Lawmakers should require HHS to make the cuts apply first to states with DSH allotments that are projected to be unspent, the report states.
Devise a new methodology. Congress should also require HHS to come up with a new methodology to distribute the DSH cuts in a way that gradually comes closer to reflecting each state's current need, "after adjusting for differences in hospital costs in different geographic areas," the report states.
While expressing appreciation for MACPAC's work, America's Essential Hospitals said in a statement that the priority should be stopping the planned cuts altogether.
"We cannot overstate the threat this cut poses to health care access and to hospitals that care for low-income and other vulnerable patients," the association of safety-net hospitals said. "If this cut occurs, essential hospitals will be unable to sustain the same comprehensive level of service they now provide to their communities."
The statement highlighted MACPAC's analysis that shows the Medicaid shortfall is growing faster than uncompensated care is shrinking. That "undermines the very premise of the cuts," AEH said.
"To ensure stability for these hospitals and the health and economic vitality of their communities, Congress must act now to stop the October DSH payment reduction," AEH said.