In recent years, Medicaid supplemental payments (DSH and UPL payments) have grown in importance as a way for states to compensate providers and support safety-net hospitals. However, because these payments are typically not tied to services or quality, they detract from state efforts to move to more value-based purchasing.
In a new issue brief prepared for the Commonwealth Fund, Manatt Health explores options and challenges in redeploying the funds so they may better align with states’ efforts to promote high-quality, cost-effective care, ensure fair payment rates, and support safety-net hospitals. The issue brief also examines recent policy and regulatory developments that are prompting reevaluation of the use of supplemental payments. Because of the way the nonfederal share of these payments is typically funded, reform may require a shift in both how these funds are distributed and how they are financed.