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MACPAC Makes DSH Recommendations, Explores Coverage for Adults Leaving Incarceration

In its June 2023 report to Congress, the Medicaid and CHIP Payment and Access Commission (MACPAC) made recommendations on countercyclical disproportionate share hospital (DSH) funding policy and explored health care challenges faced by adults leaving incarceration.

In the first chapter, MACPAC recommends adjustments to DSH payments that aim to improve the relationship between total DSH funding and the need for DSH payments. In light of several recent economic downturns, Congress has increased the federal medical assistance percentage (FMAP), which reduces total DSH funding available. MACPAC recommends measures to counter this effect when the need for DSH payments increases:

  • Congress should amend the Social Security Act (SSA) and develop a methodology to distribute reductions in a way that gradually improves the relationship between total state and federal DSH funding and the number of non-elderly low-income individuals in a state.
  • Congress should amend the SSA to ensure FMAP changes do not affect total state and federal DSH funding.
  • Congress should amend the SSA to provide an automatic Medicaid countercyclical financing model, using the prototype the U.S. Government Accountability Office developed as the basis. The model should include:
    • An eligibility maintenance of effort requirement.
    • An upper bound of 100 percent on adjusted matching rates.
    • An increase in federal DSH allotments so that total available DSH funding does not change as a result of FMAP changes.
    • An exclusion of the countercyclical FMAP from non-DSH spending that is otherwise capped or has allotments and other services and populations that receive special matching rates.
  • Congress should remove the requirement that CMS compare DSH allotments to total state Medicaid medical assistance expenditures in a given year before finalizing DSH allotments for that year.

The third chapter of the report examines access to health care for adults leaving incarceration and includes demographic characteristics, health-related social needs, and health status of justice-involved adults. The chapter highlights opportunities to ensure timely coverage for this population, namely through Medicaid Section 1115 waiver demonstrations. Section 1115 waivers can increase coverage and access to services for individuals preparing to leave incarceration while improving coordination and communication among correctional systems and community-based providers. CMS in April provided federal guidance on this topic.

The report also includes chapters on integrating care for beneficiaries dually eligible for Medicaid and Medicare and Medicaid home- and community-based services.

Contact Senior Director of Policy Erin O’Malley at eomalley@essentialhospitals.org or 202.585.0127 with questions.

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About the Author

Faridat Animashaun is a policy associate at America's Essential Hospitals.

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