All states make supplemental Medicaid payments to certain providers. Fifty of the 51 states reported making DSH payments  during fiscal year 2010, with total reported payments ranging from about  $650,000 for South Dakota to over $3.1 billion for New York.10 states reporting the largest total DSH payments in fiscal year 2010   The   accounted for more than 70 percent of the $17.6 billion nationwide total,  and the 4 states with the largest total DSH payments—New York,  California, Texas, and New Jersey—accounted for almost half   (47 percent) of the nationwide total. In assessing the contribution of DSH payments to each state’s overall  spending, we found that DSH payments as a percentage of states’  reported Medicaid payments varied considerably among the states. Figure 1  provides information on the amount of each state’s DSH payments and  each state’s DSH payments as a percentage of its total Medicaid  expenditures. States Reported $14.4 Billion in Non-DSH Supplemental Payments during Fiscal Year 2010, but the Exact Amount of These Payments Is Not Known

During fiscal year 2010, states separately reported making $14.4 billion in  non-DSH supplemental payments (of which the federal share was   $9.9 billion), primarily for inpatient hospital services.states were to report non-DSH supplemental payments on the CMS-64  separately from their regular payments for six categories of service. For example,
27 states separately reported non-DSH supplemental payments for  inpatient hospital services, and the percentage of their expenditures  for inpatient hospital services that were non-DSH supplemental  payments ranged from less than 1 percent (Virginia and Washington)  to 48 percent (Tennessee);
13 states separately reported non-DSH supplemental payments for  outpatient hospital services, and the percentage of their expenditures  for outpatient hospital services that were non-DSH supplemental  payments ranged from less than 1 percent (Texas) to 57 percent  (Illinois); and
16 states separately reported non-DSH supplemental payments for  physician and surgical services, and the percentage of their  expenditures for physician and surgical hospital services that were  non-DSH supplemental payments ranged from less than 1 percent  (Oklahoma) to 34 percent (West Virginia). They then  took steps to improve states’ reporting of these payments, for example,  by training state staff in the use of the revised form CMS-64 and asking  regional CMS staff to work with states to identify and resolve reporting  problems. Reported Non-DSH Supplemental Payments Were over $8 Billion Higher during 2010 Than during 2006, and New and Modified Supplemental Payments Were a Factor in the Increase

The 39 states that separately reported non-DSH supplemental payments  during either 2006 or 2010 (or both) reported an increase of $8.1 billion in  non-DSH supplemental payments during this period. Most of this  increase was from 15 states that reported during both years, and most of  the reported increase was for inpatient hospital services. Changes in reporting also contributed to the increase. Concluding Observations

Medicaid supplemental payments can help ensure that providers make  important services available to Medicaid beneficiaries. Ongoing federal efforts  to improve the completeness of reporting of Medicaid supplemental  payments are important for effective oversight and to better understand  these payments’ role in financing Medicaid services. HHS stated that   HHS and CMS will continue their ongoing efforts to improve states’  reporting of Medicaid supplemental payments. Supplemental Medicaid payments include  Disproportionate Share Hospital (DSH) payments to hospitals and other  supplemental payments to hospitals or other providers, which we refer to  as non-DSH supplemental payments. To determine what supplemental  Medicaid payments states reported during fiscal year 2010 and how  non-DSH supplemental payments reported during 2010 compared with  those reported during 2006, we obtained and analyzed data about the  Medicaid expenditures states reported during these 2 years. We did not quantify the  extent to which states did not separately report their supplemental  payments. Information from Selected States

To examine reasons for differences between 2006 and 2010 in reported  non-DSH supplemental payments, and to obtain additional information  about states’ reports of these payments, we obtained information from  CMS and public sources about non-DSH supplemental payments in a  judgmental sample of 11 states selected to include a mix of relevant  characteristics. GAO-11-318SP. Medicaid: Ongoing Federal Oversight of Payments to Offset  Uncompensated Hospital Care Costs Is Warranted. Major Management Challenges and Program Risks: Department of  Health and Human Services. Medicaid: States Use Illusory Approaches to Shift Program Costs to  Federal Government.
Why GAO Did This Study

GAO designated Medicaid a high-risk program because of concerns about its size, growth, and inadequate fiscal oversight. The program cost the federal government and states an estimated $383 billion in fiscal year 2010. In addition to regular Medicaid payments to providers, states make supplemental payments, including DSH payments, which are intended to offset the uncompensated costs of care provided to uninsured individuals and Medicaid beneficiaries. States also make other supplemental payments, which we refer to as non-DSH supplemental payments, to hospitals and other providers, for example, to help offset the costs of care provided to Medicaid beneficiaries. GAO and others have raised concerns about the transparency of states Medicaid supplemental payments. GAO was asked to provide information on supplemental payments.
GAO examined (1) how much states reported paying in supplemental Medicaid payments during fiscal year 2010 and (2) how non-DSH supplemental payments reported during 2010 compared with those reported during 2006 and reasons for differences. GAO analyzed CMSs Medicaid expenditure data for all states and information from CMS and other sources about non-DSH supplemental payments in a nongeneralizable sample of 11 states selected to capture a mix of relevant characteristics.
In its comments on a draft of GAOs report, HHS stated that HHS and CMS will continue their ongoing efforts to improve states reporting of supplemental Medicaid payments.

What GAO Found

States reported $32 billion in Medicaid supplemental payments during fiscal year 2010, but the exact amount of supplemental payments is unknown because state reporting was incomplete. On expenditure reports used to obtain federal funds filed with the Department of Health and Human Services (HHS) Centers for Medicare & Medicaid Services (CMS), states reported the following:
A total of $17.6 billion in Disproportionate Share Hospital (DSH) payments. The 10 states reporting the largest total DSH payments in fiscal year 2010 accounted for more than 70 percent of the nationwide total, with 4 states New York, California, Texas, and New Jerseyaccounting for almost half (47 percent). DSH payments as a percentage of total Medicaid payments varied considerablyranging from 1 to 17 percentamong the 50 states that reported DSH payments.
A total of $14.4 billion in non-DSH supplemental payments to hospitals and other providers. Because not all states reported these payments separately, complete information is not available. Like DSH payments, non-DSH supplemental payments as a percentage of total state Medicaid spending varied considerablyalso ranging from 1 to 17 percentamong the 30 reporting states. These payments can also constitute a large portion of states expenditures for particular categories of services, such as inpatient or outpatient hospital, nursing facility, or physician and surgical services. For example, non-DSH supplemental payments for inpatient hospital services ranged from 1 to 48 percent of state expenditures for these services among reporting states.
CMS officials told GAO that they were taking steps to improve states reporting of non-DSH supplemental payments, including working with states to train staff on reporting of payments and on identifying and resolving reporting problems.
States reported non-DSH supplemental payments were more than $8 billion higher during 2010 than during 2006, the year for which GAO previously reported on the amount of these payments. More complete state reporting of payments and new and modified supplemental payments were factors in this increase. The information available to identify changes from 2006 to 2010 came from 39 states that separately reported non-DSH supplemental payments during either 2006 or 2010 or both. Most of the increase was from the 15 states that reported some payments in both years and reported higher non-DSH supplemental payments during 2010 than 2006. In addition, most of the reported increase was for inpatient hospital services. In 11 selected states, GAO found that new and modified supplemental payments contributed to some increases. For example, new and modified supplemental payments for hospital services in Colorado and Illinois are estimated to increase the states non-DSH supplemental payments by about $300 million and $1 billion per year, respectively. However, data limitations prevented GAO from quantifying the full extent to which the increase was attributable to new and modified payments. In light of the apparent increase in non-DSH supplemental payments, ongoing federal efforts to improve the completeness of reporting are important for effective oversight and to better understand the payments role in financing Medicaid services.