New Rule Redefines Uninsured for Calculation of DSH Limits
January 16, 2012
A proposed rule would broaden the definition of uninsured with respect to disproportionate share hospital (DSH) payment calculations, possibly raising the limit on funds hospitals could receive under the program.
The rule, written by the Center for Medicare and Medicaid Service, will be published this week in the Federal Register.
A major objective of the change is to give states the maximum flexibility permitted by statute in calculating hospital-specific DSH limits.
Under current DSH rules, adopted following passage of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA), hospitals can only count persons covered by Medicaid or without any insurance toward their Federal Financial Participation (FFP) limit.
That particular rule, adopted in 2008, was in answer to CMS concerns that states were not accurately calculating the FFP for hospitals, resulting in DSH overpayments.
That was a departure from how treatment of the uninsured was counted under the Omnibus Budget & Reconciliation Act of 1993 (OBRA), which allowed hospitals to count services that were uninsured, even when the patient had other types of insurance coverage.
Since passage of the MMA, there has been some concern that CMS had not accurately interpreted the intent of the legislation with respect to counting uninsured care. Hospitals objected to the rule at the time due to its exclusion of uninsured services from calculation of the FFP.
The proposed change would return the definition of insured services to one closer to that under OBRA, where the focus is on uninsured services, and not uninsured patients. It would also allow the counting of services delivered to individuals who had exceeded either annual or lifetime coverage limits.
In the explanatory section, the rule's authors wrote "(f)or purposes of defining uncompensated care costs for the Medicaid hospital-specific DSH limit, we believe that uncompensated costs of providing inpatient and outpatient hospital services to individuals who do not have coverage for those specific services should be considered costs for which there is no liable third party payer and thus eligible costs for Medicaid DSH payments."
They added that determination of an individual’s status as an “individual who has no health insurance (or other source of third party coverage)” for purposes of calculating the Medicaid hospital-specific DSH limit would be based on coverage for the particular inpatient or outpatient hospital service provided to an individual under the terms of an insurance or other coverage plan, or actual coverage for the service through such a plan or another third party.
Determination of allowable services would not be based on payment, but on coverage of the service.
The rule would apply to DSH audits and reports submitted following the effective date of the rule, thereby avoiding any unintended, and potentially significant, financial impact resulting from the 2008 DSH final rule.