Report Title:
Medicaid Provider Payments
Description:
Requiring the DHS to withdraw its proposed state medicaid plan, and amend it to eliminate ˝ of the inflation component; prohibit resubmission of a plan until the legislature approves and funds a mandatory program to replace the inflation component; set in the plan dates for the elimination of the inflation component; submit to HCFA a rate reconsideration for acute facilities. (CD1)
|
THE SENATE |
S.B. NO. |
654 |
|
TWENTY-FIRST LEGISLATURE, 2001 |
S.D. 2 |
|
|
STATE OF HAWAII |
H.D. 2 |
|
|
|
C.D. 1 |
A BILL FOR AN ACT
RELATING TO MEDICAID.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The legislature finds that a financial crisis exists in the State's Medicaid payment system to providers of medical care to the poor. The legislature further finds that the State determines the level of Medicaid payments, within federal limitations. However, the department of human services does not fund the State’s full share of Medicaid according to its own state Medicaid plan. The state Medicaid plan contains a formula for payments to hospitals and long-term care facilities that includes an inflationary factor, known as the DRI McGraw-Hill inflation factor, as estimated in DRI McGraw-Hill Health Care Costs that factor in National Forecast Tables, Health Care Financing Administration's Nursing Home Without Capital Market Basket, as well as a factor for a return on equity. The department of human services recently submitted a proposal to the U.S. Health Care Financing Administration (HCFA) to amend to the state Medicaid plan to provide only one-half of the DRI McGraw-Hill inflation factor, and none for return on equity. With the passage of time, the proposed amendment would result in payments falling further and further behind equitable levels. Although the HCFA has not yet made a decision on the proposed amendment, the department of human services has requested funding for only one-half of the DRI McGraw-Hill inflationary factor, and none for return on equity for the fiscal biennium 2001-2003. The shortage has been estimated at $6,000,000 per year, and the effect would be a reduction in payments to all hospitals and nursing homes that provide care to the aged, blind, and disabled population.
The reduction in Medicaid payments occurs at a time when many of Hawaii’s hospitals and long-term care facilities are struggling financially. In an effort to reduce losses, health care facilities have been laying off workers, freezing vacant positions, and eliminating programs. For example, Queen’s Medical Center has laid off nearly two hundred employees and closed its cardiac rehabilitation unit. It was planning to close its dental clinic, which fortunately will now be kept open because of financial support promised by the State. These cost cutting measures have been attributed to lower Medicaid payments. A close examination of health care in Hawaii reveals that its health care infrastructure is at risk, and in turn, so is Hawaii’s reputation as the "Health State."
The financing of health care becomes problematic whenever payments are lower than the actual costs of providing the care. In the past, providers have been able to shift much of the burden of paying for Medicaid patients to other sources of revenue. However, the ability to "cost shift" has become increasingly difficult because of changes in the health care environment. For example, the increasing popularity of managed care has resulted in significantly reduced payments from private payers. In addition, Medicare payments for older Americans have been reduced significantly as a result of the 1997 Balanced Budget Act, and these payments have been only partially restored as a result of subsequent relief efforts. The legislature further finds that in recognition of the current structure of the health care environment, equity dictates that Medicaid pay its fair share for health care.
The department of human services has also frozen any increase in payment rates, even though actual costs have increased and will continue to increase due to factors beyond human control, such as hurricane or other acts of God, changes in the safety code, or changes in the licensure law. Currently the state Medicaid plan includes a procedure for a provider to request a rate reconsideration for these and other reasons. However, the department of human services has submitted a proposal to the HCFA to amend the state Medicaid plan by eliminating any rate reconsideration. Without rate reconsideration, some costs may not be considered in the determination of Medicaid payments.
The DHS proposal to amend the state Medicaid plan also includes a modification of the "grandfathered capital component" that is used to determine Medicaid payments for new providers or providers with new beds. This modification would result in reduced payments to these facilities for services to their aged, blind, and disabled Medicaid participants.
Through the QUEST program the State negotiates with health plans to provide health care for a specified rate per person per month. It has been the practice to hold the per capita rate the same through the several years of a contract with a health plan without inflationary adjustments, even though the inflation for health care is typically higher than the inflation for the economy in general. The legislature further finds that Hawaii’s Medicaid program should acknowledge the reality of inflation and adjust payments accordingly.
The legislature unfortunately has no funds to increase payments to these providers but would like to provide some assistance so that their reimbursement levels are not further lowered. Thus, this measure is requiring the department of human services to withdraw, amend, and implement provisions in their state medicaid plan that will not further devastate our providers and submit for approval to the HCFA a state medicaid plan amendment to restore rate reconsideration.
SECTION 2. The department of human services shall:
(1) Withdraw from the U.S. Health Care Financing Administration (HCFA) its proposed state medicaid plan amendment to eliminate one-half of the DRI McGraw-Hill inflation component and the return on equity;
(2) Not resubmit to HCFA any new proposed state medicaid plan amendment to eliminate or diminish the DRI McGraw-Hill inflation component and the return on equity until such time as the legislature approves and funds a mandatory program to replace them;
(3) Set, in the respective proposals for amendments to the state medicaid plan, concurrent implementation dates for both the elimination or diminishment of the DRI McGraw-Hill inflation component and the return on equity, and the mandatory program to replace them; and
(4) Submit to HCFA for approval a state medicaid plan amendment to restore rate reconsideration for acute facilities.
SECTION 3. This Act shall take effect upon its approval.