MACPAC Makes Medicaid Financing Transparency Recommendations

In its June 2024 report to Congress, the Medicaid and CHIP Payment and Access Commission (MACPAC) recommends that Congress add new Medicaid and CHIP financing transparency requirements, including an annual report on Medicaid and CHIP financing methods.

To provide context for these recommendations, MACPAC discusses the history of Medicaid financing, provides themes from stakeholder interviews, and reviews Texas’ new financing transparency requirements, which could be a model for new federal requirements.

Themes from Stakeholder Interviews

MACPAC interviewed 17 national experts, state officials, federal officials, and provider associations and identifies several considerations for improving transparency:

• Mistrust about how CMS would use additional financing data.
• Lack of comprehensive information on state financing methods.
• Incomplete reporting of state-level financing amounts.
• Challenges attributing financing sources to specific payments.
• Challenges using provider-level financing data to determine net payments.

Texas’ Medicaid Financing Transparency Requirements

MACPAC also reviews new data on provider-level financing in Texas to illustrate the effects of Medicaid financing costs on the net payments that providers receive. In 2023, Texas released the first public report of Medicaid financing that includes information on local provider participation funds, other sources of intergovernmental transfers (IGTs), and certified public expenditures (CPEs) used to support Medicaid expenditures. The report also identifies administrative fees collected to support the program. For illustrative purposes, MACPAC uses this data to examine managed care directed payments for unnamed private and public hospitals in Texas.

Recommendations

1. To improve transparency and enable analyses of net Medicaid payments, Congress should amend Section 1903(d)(6) of the Social Security Act (the Act) to require states submit an annual, comprehensive report on their Medicaid financing methods and the amounts of the nonfederal share of Medicaid spending derived from the specific providers. The report should include:
   1. A description of the methods used to finance the nonfederal share of Medicaid payments, including the parameters of any health care–related taxes.
   2. A state-level summary of the amounts of Medicaid spending derived from each source of nonfederal share, including state general funds, health care–related taxes, intergovernmental transfers, and certified public expenditures.
   3. A provider-level database of the costs of financing the nonfederal share of Medicaid spending, including administrative fees and other costs that are not used to finance payments to the provider contributing the nonfederal share.
2. To provide complete and consistent information of the financing of Medicaid and CHIP, Congress should amend Section 2107(e) of the Act to apply the Medicaid financing transparency requirements of Section 1903(d)(6) of the Act to CHIP.

Design Considerations

To implement these recommendations, MACPAC also recommends that CMS collect specific information about financing methods:

• A summary of all types of health care–related taxes, IGTs, and CPEs used to finance Medicaid payments.
• Information about whether the financing source is used to finance a specific type of Medicaid payment, such as supplemental payments.
• Parameters of the health care–related tax, such as the entity being taxed, the tax rate, and whether the tax qualifies for a waiver of the statutory requirements for uniform and broad-based health care-related taxes.
• Information on any administrative fees charged for IGT or CPE financing.
• Any other descriptive information that could help inform analyses of state- and provider- level financing information.

Further, MACPAC recommends that CMS establish additional process controls to review the accuracy and consistency of the data. MACPAC also recommends implementing some features from Texas’ new provider level financing report, such as:

• The ability to link provider-level financing data with Medicare cost reports and other claims data.
• Information to track the timing of the transfer relative to the date of payment.
• An option to report financing for specific supplemental payment programs.

MACPAC’s June report also includes other descriptive chapters on care coordination for people dually eligible for Medicaid and Medicare, Medicare Savings Programs, and Medicaid demographic data collection.

Contact Director of Policy Rob Nelb, MPH, at rnelb@essentialhospitals.org or 202.585.0127 with questions.