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December 10, 2021

CMS Releases State Medicaid Director Letter with Guidance on Implementation of Supplemental Payment Reporting and DSH Limit Provisions in Consolidated Appropriations Act of 2021

In a State Medicaid Director Letter (SMDL) dated December 10, 2021, the Centers for Medicare & Medicaid Services (CMS) issued guidance on how the agency will implement several Medicaid-related provisions from the Consolidated Appropriations Act of 2021 (CAA).

As of the quarter beginning October 1, 2021, states that are either (1) claiming federal matching funds for approved supplemental payments on the Form CMS-64 or (2) requesting a State Plan Amendment (SPA) providing for a new, renewed, or modified supplemental payment will be required to report provider-specific supplemental payment amounts and other narrative and quantitative data. Supplemental payments include payments that supplement base payments in fee-for-service Medicaid or under demonstration authority; they do not include managed care directed payments. CMS will be modifying the Medicaid Budget and Expenditure System (MBES) to allow for uniform collection of supplemental payment data. States that fail to report required data may be unable to obtain CMS approval of SPAs and waivers, or may be subject to deferral or disallowance of funding claimed through the Form CMS-64.

With respect to the hospital-specific disproportionate share hospital (DSH) limit, the CAA requires the majority of hospitals to exclude costs and payments associated with Medicaid beneficiaries who have dual coverage for whom Medicaid is not the primary payer. A small number of hospitals, however, will qualify for an exception and may include both costs and payments associated with beneficiaries with third-party coverage if doing so produces a higher limit. Excepted hospitals are those in the 97th percentile or above of all hospitals with regard to the number or percentage of Medicare supplemental security income (SSI) days to total inpatient days. In the SMDL, CMS acknowledged that there is no current data source that captures the SSI data needed to apply the exception, thus CMS will be developing a new data source and will engage in future rulemaking as needed.