Editor’s note: VTDigger’s investigation, Medicaid by the Numbers, draws on data from the Department of Vermont Health Access, the Legislature’s Joint Fiscal Office, the U.S. Census Bureau and other relevant sources. In some cases, VTDigger found it difficult to obtain data, and has sought to make that clear to readers wherever appropriate. The series started March 6 and will continue over the next several weeks. Find all of the stories here.
[T]he number of people without health insurance living in Vermont has plummeted — thanks to federal and state expansion of Medicaid programs.
That’s good news for patients, who now have health insurance, and hospitals, which are under considerably less pressure to provide so-called “charity” or free care to Vermonters who are uninsured.
But since 2009, the state’s uninsured rate has dropped 6 percentage points. Meanwhile, payments to Vermont’s 14 hospitals for so-called charity care have stayed roughly level.
And lawmakers wonder what hospitals are doing with the $37.4 million in Medicaid funding they receive to take care of uninsured patients.
The money comes from a Medicaid program called disproportionate share hospital payments, abbreviated DSH (pronounced “dish”), that has been used to pay hospitals for charity care since the 1990s.
Lawmakers are struggling to balance a structural deficit in Vermont’s Medicaid program this year, and they want to know where the DSH money is going. Hospitals tell VTDigger they can’t track what it’s used for, and they don’t want the payments to stop.
DSH payments are regulated through the Centers for Medicare and Medicaid Services, and the Department of Vermont Health Access is allowed to set a complex payment criteria for awarding the DSH payments. In a nutshell, the DSH payments pay for a hospital’s uncompensated care, which can also include patients who are eligible for Medicaid.
Vermont and the federal government both partially fund the payments. The drawdown in federal funds looks like this: Vermont imposes a tax on hospitals; the federal government matches that money to pay for the state’s Medicaid program; and hospitals get some of the provider tax back in the form of DSH payments.
The Affordable Care Act, which was largely intended to reduce the number of uninsured people in the United States, targeted DSH as a means of paying for charity care. The law included a provision that would have required a drop in DSH payments across the country starting in 2014 as insurance coverage expanded.
The law specifically directed the U.S. Secretary of Health and Human Services to reduce the DSH payments for hospitals in several categories, depending on the degree to which hospitals served populations with low uninsured rates, according to a report by the Kaiser Family Foundation.
But hospital lobbyists successfully fought in Congress to delay the drop in DSH payments until at least 2017. The Washington Post reported that the proposed cuts to DSH payments would have hurt hospitals in states that did not expand Medicaid, because those states still have high populations of uninsured patients.
DSH in Vermont
[V]ermont, however, expanded Medicaid and offers subsidies on the state’s health insurance exchange that are more generous than the federal exchange. In 2009, prior to the Affordable Care Act, the percentage of people in Vermont who were uninsured was 7.6 percent. The uninsured rate fell to 6.8 percent in 2012 and 3.7 percent in 2014 — the second lowest uninsured rate in the country.
During the same time period, DSH payments to all Vermont hospitals were roughly level — between $34.5 million in 2004 and $37.4 million in 2016. The total amount of uncompensated care that hospitals provided, before DSH payments, increased from $71.7 million in 2004, peaked at $130.4 million in 2014, and now may be falling.
[M]eanwhile, the state has faced a structural Medicaid deficit that state officials say is squeezing other government services. During the current legislative session, lawmakers are looking for ways to save money in light of a projected Medicaid deficit of $120 million to $130 million in the upcoming fiscal year, with the state on the hook for about $50 million to $60 million.
Rep. Mitzi Johnson, D-South Hero, who chairs the House Appropriations Committee, said lawmakers “need to look at how the drop in the rate of uninsured has shifted the health care landscape.”
“We put in a lot of ways to support people who did not have insurance, and now that that’s a smaller population of people, I think we need to look at the whole universe of (spending),” Johnson said.
Sen. Tim Ashe, D/P-Chittenden, the chair of the Senate Finance Committee, has taken on the DSH payment issue as a pet project, and he pushed legislation through in 2015 that ordered the Green Mountain Care Board to study the issue.
“The service that (hospitals) were meant to provide was cut in half,” Ashe said. “If (money is) there to pay for uninsured people and that population has been cut in half, you scratch your head and say, ‘How come they still have 100 percent of the money they were getting before?’”
“Now, I’m not saying Vermont (should stop paying the hospitals), but it means that dollars that were there to meet the needs of uninsured are there now being utilized for other purposes,” he said.
Ashe added a provision to the 2015 omnibus health care bill, which became Act 54. The Legislature passed that bill with a section that directed the Green Mountain Care Board to analyze hospital budgets in search of where the DSH payments were going.
“The reduction in the number of uninsured Vermonters has increased costs to the General Fund, but the funds allocated in hospital budgets to serve those Vermonters have not ‘followed the customer,’” the bill said. “In essence, these funds are stranded in the hospital budgets to pay for ‘phantom’ uninsured patients.”
Lawmakers ‘disappointed’ in state’s investigation
[I]n October, the Green Mountain Care Board released a report in accordance with the law. The report described how “free care” relates to the board’s hospital budget review process and found there were no “stranded dollars” in the hospital system.
The term “stranded dollars” refers to DSH payments that went toward hospital budgets but couldn’t be accounted for on a single line item. The report said, “Act 54’s definition of ‘stranded dollars’ does not square with the reality of how hospitals construct their budgets or how budgets function.”
The report said Act 54 “correctly states that the reduction of uninsured Vermonters has increased costs to the General Fund.” The general fund is the main pot of money the state uses to draw down federal money and care for Medicaid enrollees.
“There is, however, no direct, measurable correlation between Vermonters obtaining insurance coverage and how hospitals budget for free care, in part because hospitals provide free care to both insured and uninsured Vermonters,” the report said.
“Rather than hunt for ‘stranded dollars’ by scrutinizing isolated components of the hospitals’ budgets,” the board uses regulation to try to reduce how much revenue hospitals make through patient care and lower how much hospitals charge commercial insurers, the report said.
Al Gobeille, the chair of the Green Mountain Care Board, said in an interview that “stranded dollars” and “phantom” uninsured patients is language that comes from Vermont’s education debate, in which the state gives grants to schools to pay for students who have left the district.
Gobeille said all money that a hospital receives shows up in one way or another on its profit and loss reports or balance sheets, so the better question is whether hospital surpluses were too high. “Our point was, no, we didn’t think it was too high,” he said.
In fiscal year 2015, the board sought to keep growth of hospital revenue from patient care to 3.8 percent, but revenue instead grew to 5 percent. In the current fiscal year, 2016, the board has approved spending targets that would rise 3.6 percent over 2015’s budgeted level.
Mike Del Trecco, the vice president of finance for the Vermont Association of Hospitals and Health Systems, said DSH payments would not be identified in a hospital’s budget because hospitals submit their budgets with aggregated financial information.
“DSH payments are one component of the net revenue that hospitals use to cover the expenses of caring for these patients,” Del Trecco said. He added that DSH payments allow hospitals to “continue serving everyone, regardless of ability to pay,” and the association does not support reducing them unless it’s brought up “in the larger context of payment reform.”
Rep. Chris Pearson, P-Burlington, the vice chair of the House Health Care Committee, was not happy with the substance of the report. “I thought it lacked meaningful — anything,” he said. “I don’t think it gave us the information that we were after.”
Pearson said the wording of the bill may have affected the results of the report. He said the Legislature asked the board to look at data for fiscal year 2016, but lawmakers may have been better served using data from fiscal 2015.
Ashe, too, was disappointed with the report. “We’re talking about millions of dollars in this discussion, and it isn’t sufficient to me to say, ‘No, there’s no money left because it’s been spent somewhere else.’”
“That’s essentially what the report says,” he said. “I’d like to see a little more analysis about how that occurs.”
