This is a relatively long read, but an excellent summary of potential actions the feds may take to reduce Medicaid spending by $880 billion over the next decade.

Of interest to EMS folks is the target on Medicaid Directed Payment programs, which is the general framework for many of the Ground Emergency Medical Transport (GEMT) Medicaid supplemental payment programs.

The report references that these programs will likely be targeted for ‘reform’, even those ‘supported’ by a “provider tax” (i.e.: IGT).

The CMS OIG has been auditing GEMT programs and cost reports by public providers since 2024. Public ambulance provider cost reports from California, Texas and Florida have been most heavily targeted.

The OIG report is due out this year: https://oig.hhs.gov/reports-and-publications/workplan/summary/wp-summary-0000786.asp

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1 big thing: The Medicaid money bag

Caitlyn Owens - Axios

February 14, 2025

https://www.axios.com/newsletters/axios-future-of-health-care-71bdf630-e98d-11ef-b85f-dda25f81fbf4.html

House Republicans finally previewed what level of spending cuts they'll be looking for to pay for tax cuts later this year, and there's a big target on Medicaid.

The big picture: Republicans may be looking for Medicaid spending reductions to the tune of nearly $900 billion over the next decade. While some options have come up more than others, there are actually quite a few different levers they could pull to get there.

The question is which — if any — end up being politically palatable enough to eventually make it through both the House and the Senate.

This is ultimately a fight with providers

Most — if not all — roads to big Medicaid savings for the federal government lead to hospitals' and other providers' wallets.

Why it matters: Some hospitals are making a lot of money (and running Super Bowl ads), while others are struggling and on the brink of failure. Regardless, the hospital industry is a formidable presence in Washington, which could create big headaches for lawmakers seeking to enact reforms that hospitals don't like.

Where it stands: Industry statements started hitting my inbox yesterday shortly after House Republicans released their budget resolution, which called for $880 billion in spending reductions within the jurisdiction of the committee that covers Medicaid.

"While some have suggested dramatic reductions in the Medicaid program as part of a reconciliation vehicle, we would urge Congress to reject that approach," the American Hospital Association warned.

"America's Essential Hospitals stoutly opposes and categorically condemns any cuts to Medicaid and Medicare that would result from this blueprint," the group wrote. "We cannot afford the resulting loss of life-saving safety net services that millions of Americans need to stay healthy."

Between the lines: Yes, if people lose Medicaid and become uninsured, hospitals will face higher uncompensated care costs. But it's more than that.

Many cost-saving proposals simply reduce the amount of federal dollars that states get for the program, in one way or another. States would then have to decide whether to make up the costs themselves, cut enrollment, reduce benefits or reduce what they pay providers.

Cutting enrollment and reducing benefits in a way that meaningfully curbs costs is hard, said Matt Salo, the former executive director of the National Association of Medicaid Directors. That leaves provider cuts.

"I think what's different this time around is the hospitals have gotten much more sophisticated about articulating what happens if you crack down," Salo said.

"If you squeeze the money to the states, the states are going to squeeze the money to providers. And if you squeeze the money to providers, they're going to squeeze access to beneficiaries. It's a vicious cycle."

Zoom in: Capping federal Medicaid spending — one of the two most-talked-about reforms on the menu so far, along with work requirements — could reduce federal spending by hundreds of billions of dollars, or even more than a trillion dollars, depending on how it's structured, per the Committee for a Responsible Federal Budget.

Getting moderates to support per capita caps in 2017 was really hard, and ultimately a lot of them wouldn't do it. That ended up being OK given the House GOP's vote margin at the time, but that margin is now much, much smaller.

Yes, but: There are other ways to get to $880 billion in cuts, should Republicans end up needing to hit somewhere in that ballpark and choose to do it primarily via the Medicaid program.

For example ...

They could simply reduce the level of federal reimbursement for Medicaid expansion enrollees, which is currently at 90% — much higher than the reimbursement rate for other populations.

They could reduce the minimum federal match rate generally, which would result in wealthier and generally bluer states getting less funding. (The problem: There are still plenty of House Republicans from New York and California.)

Or they could target providers directly through provider taxes and what are called state-directed payments, which have ballooned in recent years. Keep reading for more on that.

And, of course, the Trump administration has been big on cutting waste, fraud and abuse writ large.

The bottom line: "It all comes back to the providers eventually in different ways," said Chip Kahn, CEO of the Federation of American Hospitals.

"All the ways you have to get to 880 [billion dollars] are not in the interest of the Medicaid recipients who depend on hospitals, doctors and nursing homes and other settings for their care," he added.

Here's a little-known fact, outside of the health nerds circle: Some providers actually get pretty high payment rates now for seeing Medicaid enrollees.

Between the lines: What's been a brewing think-tank fight over Medicaid payments to hospitals and doctors could soon spill onto the main political stage should Republicans decide this is the most politically palatable route of attack.

Context: State-directed Medicaid payments have ballooned in size and allow some providers to now get paid similarly for seeing Medicaid and commercially insured patients.

That's been great for states, hospitals and arguably Medicaid patients, but not so great for the federal budget.

It's also a relatively new phenomenon; CMS first allowed states to begin directing managed care organizations to pay providers under certain circumstances in 2016.

"We've seen sort of the initial explosion of these, so the growth trend is going to be astronomical as more and more states figure out how to game the system," said the Paragon Health Institute's Ryan Long, who until recently was a top GOP health aide on the Hill.

The intrigue: Some reform advocates argue that this is indeed an easier political lift, namely because it's had bipartisan support in the past and most members simply don't know how much providers are being paid to see Medicaid patients these days.

"We've now constructed a welfare program to be a financial windfall for nonprofit hospitals, and Congress should address that," said Paragon President Brian Blase, who has been on the Hill discussing the think tank's policy views with members.

Spoiler: Providers won't like it if Republicans go this route.

"If you go after it, either you're going to have hospitals and other settings having to cut back on services, because you're not getting paid sufficiently for them, or you're going to have to go to other payers and there will be more cost shift," Kahn said.

By the numbers: MACPAC has estimated that directed payments approved as of August totaled more than $110 billion in 2024 — a 60% increase over the projections they made based on arrangements approved as of early 2023.

MACPAC identified 29 payment arrangements that would each increase provider payments by more than $1 billion a year. Most of these raise provider reimbursement rates above the Medicare rate, and 11 bumped up rates to at least 90% of the average commercial rate.

Commercial payments are often multiples of what Medicare pays, and are frequently criticized as exorbitant.

Health systems were the beneficiaries in 24 of the 29 large payment arrangements.

HCA received nearly $4 billion from 18 different states in 2023 related to supplemental payment programs, according to a Raymond James investor note from last year. Tenet received nearly $1 billion in 2023, and Universal Health Services expected to receive around $1.3 billion from supplemental programs in 2024.

These payments are often financed through provider taxes, which have been targeted by both parties in the past.

These taxes, levied by states on providers, ultimately allow the state to get reimbursed more from the federal government.

Reforms to the policy, depending on how they're structured, could save the federal government hundreds of billions of dollars, per CBO — a solid chunk of the Medicaid money Republicans may need.

What they're saying: Whether this rise in Medicaid payment rates is a good or bad thing depends who you ask.

Proponents say they help promote access and equity, as Medicaid payments have historically been lower than both commercial and Medicare rates.

"Higher payments are expected to grow the pool of providers who serve Medicaid patients and improve access to providers that limit the number of Medicaid patients they serve. Additionally, as Medicaid becomes a more competitive payer, the policy can provide critical support to safety-net providers," the Commonwealth Fund argued in a blog post last year.

But critics say the federal government is getting ripped off. Paragon is referring to such measures as "money laundering."