Medicaid Cuts for Health Care Acquired Conditions

Focus on Health Care Reform: Medicaid Cuts for Health Care Acquired Conditions A rather vague provision of the Patient Protection and Affordable Care Act (PPACA – or now more commonly called the Affordable Care Act or ACA) would cut Medicaid payments to states for Medicaid-covered services relating to health care acquired conditions. This provision expands on existing law that reduces Medicare payments to hospitals for some health care acquired conditions by eliminating any increase in the patient’s Diagnosis Related Group (DRG) that otherwise would result from the condition. The ACA language applies this concept to Medicaid, but does not limit the expansion to hospitals. The statute calls for relatively quick action by requiring the U.S. Department of Health and Human Services (HHS) to adopt regulations effective July 1, 2011, that spell out the details of the program. As is typical for federal Medicaid provisions, the law would cut payments to states (presumably through lowered Federal Financial Participation) instead of cutting providers directly, but that could be the ultimate result because states otherwise would have to make up the difference using state funds. The statute requires that the regulations “shall ensure that the prohibition on payment for health care-acquired conditions shall not result in a loss of access to care or services for Medicaid beneficiaries,” although it is not clear what this means given that payment cuts are mandated. The law defines health care acquired conditions by referring to secondary diagnosis codes that affect classification under the DRG system, which is also somewhat unclear in its application to non-hospital providers, so the definition will have to be fleshed out in regulations. In developing the regulations, HHS is to consider state-level programs that cut Medicaid payments for health care acquired conditions as well as the existing Medicare rules for hospitals. As this portion of the health care reform legislation has an unknown but potentially significant impact on long-term care providers, we will need to carefully monitor and provide input into the regulations when they appear.

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