The way North Carolina's Medicaid expansion is financed could incentivize hospitals to increase prices, experts wrote in an article published June 21 in Health Affairs.
The expansion, signed into law in March, is financed by a tax on state hospitals' costs and transfers from public hospitals. To offset the tax increase, hospitals will receive higher Medicaid rates, Ge Bai, PhD, professor of accounting at Johns Hopkins Carey Business School and professor of health policy and management at Johns Hopkins Bloomberg School of Public Health in Baltimore, and Ann Kempski, an independent healthcare consultant and former executive director of the Delaware Health Care Commission, wrote in the piece.
"The deal gives hospitals a strong incentive to raise their costs because when they do, they generate federal funds as much as nine times greater than what they pay in additional tax," Dr. Bai and Ms. Kempski wrote.
North Carolina is not the only state with this issue, as reliance on hospital taxes to finance Medicaid grows, the authors wrote. Payments made by Medicaid managed care plans are capped at commercial rates, meaning hospitals can raise their rates for commercial payments and effectively raise their Medicaid reimbursements, according to the article.
CMS should cap payments at Medicare rates and limit revenue generated by hospital taxes, the authors wrote.
"There is a long history in Medicaid of states joining with providers to levy provider taxes to claim federal funds for those same providers. Congress and CMS act only after billions have been spent in dubious schemes," Ms. Kempski and Dr. Bai wrote.
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