Supplemental Payment Reporting Requirements and Guidance Development

Doctors looking at graphs on tablet

States have the flexibility to set Medicaid payment rates for providers consistent with federal regulations that require payments promoting the Medicaid program’s economy and efficiency.

In addition to base payments, which are tied to a specific service rendered by the provider, states make supplemental payments to providers to support specific policy initiatives, such as quality improvements, or to offset low base rates to make their overall Medicaid reimbursement comparable to Medicare reimbursement.

Over the past two decades, supplemental payments represent a growing share of overall Medicaid expenditures in most states and have been subjected to increased scrutiny. In 2020, supplemental payments totaling $48.7 billion accounted for 24 percent of the total Medicaid payments made to hospitals.

As supplemental payments are now a major source of Medicaid reimbursement for providers in many states, both the U.S. Government Accountability Office and the Medicaid and CHIP Payment and Access Commission have called for the collection of more consistent and complete supplemental payment data to facilitate Centers for Medicare & Medicaid Services (CMS) oversight of state compliance with statutory requirements.

To improve the transparency of states’ supplemental payment programs, Section 202 of the 2021 Consolidated Appropriations Act requires the Department of Health and Human Services to collect and report data on non-Disproportionate Share Hospital supplemental payments beginning October 1, 2021, including how payments are calculated and distributed, as well as the payments made to each provider.

CMS contracted AIR and its partners to improve transparency in the supplemental payments that states make to providers and helps inform CMS financial oversight of states’ Medicaid programs. As part of the project, AIR and its partners will (a) extract provider-level supplemental payment data; (b) develop data files and report highlighting trends; (c) identify data quality issues and other areas of interest; (d) publish these reports and data files on; (e) develop guidance and provide technical assistance (TA) to states to improve the accuracy of their submissions; (f ) train CMS staff in accessing and using the data files and reports; and (g) provide rulemaking support.