July 29,2019

Grassley Statement on Newly-Released GAO Report on Medicaid Supplemental Payments

WASHINGTON – Senate Finance Committee Chairman Chuck Grassley (R-Iowa) today released the following statement regarding the Governmental Accountability Office’s (GAO) report on disproportionate share hospital (DSH) payments and states’ use and distribution of these payments to hospitals through Medicaid.

“Last week, the Senate Finance Committee successfully passed the Prescription Drug Pricing Reduction Act. As we work to lower the cost of prescription drugs, it’s important to also keep our fingers on the pulse of other critical issues impacting Americans’ health care

"This report is further evidence that the $50 billion in Medicaid supplemental payments are complex to the point of inefficient. That complexity, in addition to continuing opacity in the process, may be contributing factors to why the Inspector General finds the Medicaid program ripe for waste, fraud and abuse. The best disinfectant is sunlight. I hope this report can convince my colleagues in Congress that reforms in this program are badly needed.”

Highlights of the GAO report include:

·      DSH payments varied significantly by state, from $5.9 million to $6.8 billion;

·      Medicaid DSH payments covered 51 percent of uncompensated care costs and totaled over $18 billion;

·      Of hospitals receiving DSH payments in 2014, costs related to care for the uninsured comprised 68 percent of total uncompensated care costs. The remaining 32 percent was the Medicaid shortfall.

·      In 15 states, Medicaid paid hospitals more than the total cost of care provided to Medicaid beneficiaries, resulting in a surplus of Medicaid payments.

Medicaid disproportionate share hospital (DSH) payments are a type of supplemental payment. They are designed to help offset hospitals' uncompensated care costs for serving Medicaid beneficiaries and uninsured patients. The Affordable Care Act created a reduction schedule for Medicaid DSH payments that totaled $17.5 billion over 7 years. Congress has delayed these reductions repeatedly, and the current debate is over $44 billion in reductions over 6 years, beginning October 1, 2019.

Under the Medicaid DSH program, uncompensated care costs include costs related to care for the uninsured and the gap between a state's Medicaid payment rates and hospitals' costs for serving Medicaid beneficiaries.

Many of the details of this GAO report strengthen the report on supplemental payments in Medicaid released by the Senate Finance Committee in late April. Grassley also published an op-ed on the topic earlier this year.