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MACPAC Reviews Recommendations on Treatment of Third-Party Payments in Medicaid Shortfall Definition

March 8, 2019—In its March 7-8 meeting, the Medicaid and CHIP Access and Payment Commission (MACPAC) revisited potential policy recommendations for addressing third-party payments in the disproportionate share hospital (DSH) definition of Medicaid shortfall [see Washington Highlights, Jan. 25].

Due to a recent court ruling, third-party payments are not included as payments in the Medicaid shortfall definition, which has impacted in-state distribution of DSH funds and the limits on DSH payments to individual hospitals. Commission staff presented three unchanged policy options from its previous meeting for commissioners to consider:

  • Option 1: Count all payments and costs for Medicaid patients with third-party coverage;
  • Option 2: Do not count payments or costs for Medicaid patients with third-party coverage;
  • Option 3: Establish different rules for different types of third-party coverage situations.

Commissioners agreed that the current situation needs to be addressed (post-court decision) but were unable to come to a consensus. Several commissioners expressed concern that Option 1 could discourage hospitals from enrolling privately insured patients, as it could impact hospitals’ potential DSH payments. Others noted interest in Option 2 but felt it did not adequately address the complex and competing interests that Option 3 could better address.

The topic will be revisited and put to vote during the April 11-12 MACPAC meeting as commissioners seek a better understanding of the recommendations’ potential impacts. 


Andrew Amari
Hospital Policy and Regulatory Specialist
Telephone: 202-828-0554


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Washington Highlights, a weekly electronic newsletter, features brief updates on the latest legislative and regulatory activities affecting medical schools and teaching hospitals.

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Jason Kleinman
Senior Legislative Analyst, Govt. Relations
Telephone: 202-903-0806