On Friday, Medicaid payment advisor suggested policymakers increase managed care Targeted payments, typically used to increase Medicaid payments to hospitals.

Medicaid and CHIP Payment and Access Committee staff questioned directed payments as improvements to state programs because managed care rates were already high enough to ensure enrollees had access to care.

MACPAC recommends that the Department of Health and Human Services provide more information on payment methods and approvals online to explain how this funding stream will be used.

States can use these payments to require managed care plans to pay providers based on a specific rate or method, but the amount of spending associated with targeted payments is unclear.About half of the arrangements in effect as of December 2020 have total spending of more than $25 billion, more than Medicaid Disproportionate share of hospital payments, according to MACPAC. There is no upper limit to the payment amount.

Staff said MACPAC may consider recommending a cap on the amount of direct payments in the future, but the committee needs more information before taking that step.

Targeted payments have grown significantly since their creation in 2016. Mike Parker A review of 2018 payments found 65 approved arrangements. By the end of 2020, there were more than 200 arrangements.

MACPAC identified 35 arrangements that increased payments by more than $100 million annually, representing 90% of reported direct debit expenditures. Most of the 35 arrangements pay hospitals and raise provider compensation above Medicare fee-for-service.

CMS made $1.8 billion in new payments to Florida hospitals last year through targeted payments, while Ohio tripled payments to certain hospital physicians, according to MACPAC.Utah uses targeted payments to save Older Supplemental Payment System for the hospital.

Currently, states require CMS approval before implementing targeted payments that are not based on state program rates, and states must also develop an assessment plan. But MACPAC staff said there was no written guidance on who would need to review those amounts or how states should evaluate their plans. With the payment target unclear, it’s hard to say whether they’ve hit it.

MACPAC on Friday recommended that HHS require a more rigorous evaluation program for direct payments, so that provider rates are significantly higher than the base state Medicaid rates, in order to better assess the performance and effectiveness of those payments.

Commissioner Brian Burwell, whose term ends this month at MACPAC, said he hoped MACPAC would continue to review Medicaid hospital financing in the future. The committee recommended more data and transparency on targeted payments and supplemental funding like DSH, but he would like to see a policy fix on how Medicaid pays hospitals.

“The more we figure out what’s going on, the more absurd the whole plan appears… It’s not all bad. We do it for different reasons,” said Burwell, vice president of healthcare policy and research at Ventech Solutions, managing the government. Institutional Technology Program. “But to me, it seems completely absurd that Medicaid is ultimately providing this financing mechanism for hospitals, especially safety net hospitals.”

Other commissioners noted that these are federally permitted payment mechanisms and that policymakers need to be careful not to change the system with unintended consequences.

Commissioner Bob Duncan, executive vice president and chief operating officer of Connecticut Children’s Hospital, also warned the organization not to describe targeted payments as inherently bad.

“I think we’re heading in the right direction, but I think we have to be careful not to generalize all supplemental directed payments or negative brushstrokes,” Duncan said, clarifying that his hospital hasn’t received any supplemental payments other than not being able to Proportionate share of hospital money.