Healthcare Technology Featured Article

June 25, 2019

Patient Advocacy and Medicaid Eligibility: How Hospitals Can Close the Gap to Ensure Payment

The state has the liberty of setting Medicaid rates the hospitals and providers receive after delivering their service. It is common knowledge that Medicaid payments, like any other public payers, are often below costs on average. To avoid a shortfall, supplemental payments are applied in addition to the base payment to bridge the gap and ensure hospitals get paid. However, there is no definitive information as to how much the actual base pay Medicaid makes for the hospitals since there’s no data source made available to the public. Nevertheless, it is still essential to understand the components involved.

Are you interested to know if you are eligible? Look for a helpful guide to Medicaid eligibility requirements now.

How Hospitals Get Paid

The Medicaid payment for the service provided by the hospitals are most often different from the actual charge hospitals set it for. In other words, Medicaid doesn’t pay for the actual cost of the service or incurred expenses. It is the state Medicaid agencies who arrange the payment rate, also called the “base rate,” for the services used explicitly by the patient. The rest of the gap will be bolstered by supplemental payments such as:

  • Fee-For-Service (FFS)
  • Managed Care Pass-Through payments
  • Disproportionate Share Hospital (DSH)
  • Non-DSH supplemental payments
  • Section 1115 Waiver supplemental payments

Base Rate: After the process of rate setting, the state will use the determined amount to reimburse a provider for the service provided. When discerning the rates, they take into consideration their affordability and cost-effectiveness factors, all while making sure it meets the service delivery system needs. Again, this doesn’t reflect their actual costs.

There is a State by State Medicaid Guide when determining your eligibility, and the same goes for its base rate.

Non-DSH Supplemental Payments: The Non-DSH payment may or may not be necessarily tied to a specific legal or regulatory purpose. There is no current federal requirement obliging states to make Non-DSH payments. Therefore, they have full discretion over how the payments will be distributed. The states have the option to disburse it to any provider, including those who didn’t necessarily render a service to a Medicaid enrollee.

Types of Non-DSH Supplemental Payments:

  1. UPL or Upper Payment Limits: This is a federal maximum limit set for the reimbursement of Medicaid providers. UPL has a spending cap across all states, varying from different types of providers.

  • Inpatient and outpatient hospitals have separate and different UPLs.
  • Hospitals will not be paid an amount totaling more than what Medicare and Medicaid DSH payments would’ve covered.
  • The federal cap on the state’s Medicaid hospital spending varies from state to state, but UPL and DSH allotment will be accounted for the total of the cap.
  1. IGT or Intergovernmental Transfers: This is a legitimate transfer of funds from one state agency, county or city to the state Medicaid agency as a way of supporting good matching funds between the states’ low-income population.

Disproportionate Share Hospital Supplemental Payments (DSH): This is a required supplemental payment created for hospitals and facilities conducting treatment on numerous uninsured patients or Medicaid beneficiaries. It aims to compensate for the financial situation of the hospitals from the underpayment of low-income patients. The state sends a detailed report of DSH payment-qualified hospitals to the Secretary of Health and Human Services annually. Along with this is an independent certified audit conducted per annum.

Both DSH and Non-DSH supplemental payments can be used to close the gap and ensure payments to safety-net providers. Safety-nets are the providers treating Medicaid enrollees or the uninsured. They are the two types of Fee-For-Service (FFS) Supplemental Payments.

Waiver Supplemental Payments: This is a form of supplemental payment that is not permitted under Medicaid rules. However, this may be allowed by the Centers for Medicare & Medicaid Services through the authority of the Section 1115 waiver. There are two types of these payments:

  1. Uncompensated Care Pools: These are funds dedicated to cover the expenses and services provided by healthcare providers to uninsured patients or Medicaid beneficiaries.

  1. DSRIP or Delivery System Reform Incentive Payment: This is not bound by the services provided, nor is it strictly restricted to providers with uncompensated care. It is used to support public hospitals, particularly those that have been greatly affected by the FFS to Managed Care Transition.

For more information on Medicaid eligibility, check out this video:

State Reporting

Medicaid uses a system wherein states can report their spending. The system being used is an automated one that is called Medicaid Budget and Expenditure System/State Children’s Health Insurance Program Budget and Expenditure System (MBES/CBES). They use an API or Application Programming Interface that runs through HTTPS, which means that all data is encrypted. The access to the API is limited and one has to get a token.


The financing partnership between the federal government and the states can guarantee fruitful services in the long haul. But the upcoming adjustments in the policy may have a significant impact on many hospitals’ survival, especially those that are dependent on supplemental payments.

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