Centers for Medicare & Medicaid Services (CMS) limited the counting of section 1115 demonstration days in the Medicaid fraction of the disproportionate share hospital (DSH) calculation.
CMS clarified its long-held view that section 1115 demonstration days can be counted in the numerator of the Medicaid fraction only if they receive from demonstration (1) health insurance that covers inpatient hospital services or (2) premium assistance that covers 100 percent of the premium cost to the patient, which the patient uses to buy health insurance that covers inpatient hospital services, provided in either case that the patient is not also entitled to Medicare Part A.[1]
CMS further distinguishes section 1115 demonstrations that include uncompensated and undercompensated care pools, citing that the demonstrations do not provide health insurance benefits directly to the patient. Hospitals in Florida, Kansas, Massachusetts, New Mexico, Tennessee, and Texas will no longer be eligible to report section 1115 demonstration days for patients covered by an uncompensated/undercompensated care pool funded by a section 1115 demonstration.
CMS goes on to state that even if uncompensated/undercompensated care pools could be “regarded as” Medicaid eligible, they are electing to exercise the Secretary’s authority to not include such days in the Medicaid fraction of the disproportion share payment calculation. CMS sites the Deficit Reduction Act of 2005 as the basis for that authority.
In previous 2022 and 2023 inpatient prospective payment system (IPPS) proposed rules, CMS decided not to move forward and finalize the proposed changes due to the "number and nature" of comments received. The proposed changes are effective for discharges occurring on or after October 1, 2023.
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[1] https://www.federalregister.gov/documents/2023/02/28/2023-03770/medicare-program-medicare-disproportionate-share-hospital-dsh-payments-counting-certain-days