Medicaid is a jointly funded, federal-state health insurance program for low-income populations. Of the roughly $581.9 billion spent on Medicaid nationally in 2017, the federal share was 63 percent. Each state government’s share varies; in Pennsylvania, it has been 52 percent annually from fiscal year (FY) 2015 through FY 2019 1.
Medicaid Payment Shortfall in Pennsylvania
HAP commissioned the health care economics and consulting firm Dobson DaVanzo & Associates LLC to complete a report about the adequacy of Medicaid program payments to Pennsylvania hospitals. Based upon fiscal year 2016 data, Medicaid paid only 81.1 cents on the dollar of cost, which resulted in a $1.2 billion Medicaid payment shortfall.
All states must meet federal minimum requirements, but can opt for broader eligibility. Pennsylvania’s Medicaid program, called Medical Assistance, covers children, pregnant women, parents, seniors, and individuals with disabilities, as well as other adults who are eligible for federally assisted income maintenance payments.2
The Affordable Care Act extended Medicaid eligibility to non-elderly adults with incomes at or below 138 percent of the federal poverty limit. States that choose to participate in this expansion receive enhanced federal matching payments. Pennsylvania opted to expand its Medicaid coverage during 2015. HAP supported this expansion. More than 700,000 Pennsylvanians have benefited from access to coverage as a result.
Medicaid Disproportionate Share Hospital (DSH) Program
The Medicaid Disproportionate Share Hospital (DSH) program provides payments to hospitals that serve a high proportion of Medicaid beneficiaries and uninsured patients. The payments are essential for hospitals to offset their uncompensated care costs from treating low income patients. The amount of federal DSH funds a state can receive is limited by state-specific allotments established by federal law.
HAP advocates with state lawmakers and the Governor to maintain important Medical Assistance supplemental payments in the state budget for critical access hospitals, obstetrics/neonatal units, burn care centers, and trauma centers.
HAP works with the Pennsylvania Congressional delegation to preserve Medicaid DSH payments that provide essential financial assistance to hospitals that care for our state’s most vulnerable populations. A series of payment cuts are scheduled for fiscal years 2020 through 2025, beginning with a $4 billion reduction during 2020. Under a 2017 federal proposed rule methodology, the state's Medicaid DSH allotment would be reduced by approximately $242 million during FY 2020. HAP is engaging with federal lawmakers and working with stakeholders to address detrimental payment cuts that would have a devastating impact on Pennsylvania’s hospitals that provide crucial community services such as trauma and burn care, high-risk neonatal care, and disaster preparedness resources.
For more information, contact Jeffrey Bechtel, senior vice president, health economics and policy; Laura Stevens Kent, senior vice president of advocacy and external affairs; or Jolene Calla, vice president, health care finance and insurance. Media inquiries should be directed to Liam Migdail, director, media relations.