The Florida Senate
BILL ANALYSIS AND FISCAL IMPACT STATEMENT
(This document is based on the provisions contained in the legislation as of the latest date listed below.)
Prepared By: The Professional Staff of the Committee on Appropriations
BILL: HB 5301
INTRODUCER: House Health Care Appropriations Subcommittee and Representative Garrison
SUBJECT: Medicaid Supplemental Payment Programs
DATE: February 14, 2024
ANALYST STAFF DIRECTOR REFERENCE ACTION
1. Barr Sadberry AP Pre-meeting
I. Summary:
HB 5301 conforms statutes to funding decisions related to supplemental payment programs
included in the House proposed General Appropriations Act for Fiscal Year 2024-2025.
The bill makes, for certain hospital classes, participation in the Low Income Pool and Indirect
Graduate Medical Education supplemental payment programs contingent on the hospital’s
participation in the Hospital Directed Payment Program. The bill also provides definitions for
Hospital Directed Payment Program, Indirect Graduate Medical Program, and Low Income Pool
Program.
This bill has no fiscal impact on state revenues or state expenditures. The bill would have an
indeterminate fiscal impact on local governments and the private sector. See Section V., Fiscal
Impact Statement.
The bill provides an effective date of July 1, 2024.
II. Present Situation:
Florida Medicaid
Medicaid is the health care safety net for low-income Floridians. Medicaid is a partnership of the
federal and state governments established to provide coverage for health services for eligible
persons. The program is administered by the Agency for Health Care Administration (AHCA)
and financed by federal and state funds. The AHCA delegates certain functions to other state
agencies, including the Department of Children and Families, the Department of Health, the
Agency for Persons with Disabilities, and the Department of Elderly Affairs.
The structure of each state’s Medicaid program varies and what states must pay for is largely
determined by the federal government, as a condition of receiving federal funds.
1
Federal law
1
Title 42 U.S.C. §§ 1396-1396w-5; Title 42 C.F.R. Part 430-456 (§§ 430.0-456.725) (2016).
REVISED: BILL: HB 5301 Page 2
sets the amount, scope, and duration of services offered in the program, among other
requirements. These federal requirements create an entitlement that comes with constitutional
due process protections. The entitlement means that two parts of the Medicaid cost equation –
people and utilization – are largely predetermined for the states. The federal government sets the
minimum mandatory populations to be included in every state Medicaid program. The federal
government also sets the minimum mandatory benefits to be covered in every state Medicaid
program. These benefits include physician services, hospital services, home health services, and
family planning.
2
States can add benefits, with federal approval. Florida has added many optional
benefits, including prescription drugs, adult dental services, and dialysis.
3
States have some flexibility in the provision of Medicaid services. Section 1915(b) of the Social
Security Act provides authority for the Secretary of the U.S. Department of Health and Human
Services (HHS) to waive requirements to the extent that he or she “finds it to be cost-effective
and efficient and not inconsistent with the purposes of this title.” Section 1115 of the Social
Security Act allows states to implement demonstrations of innovative service delivery systems
that improve care, increase efficiency, and reduce costs. These laws allow HHS to waive federal
requirements to expand populations or services, or to try new ways of service delivery.
Florida operates under a Section 1115 waiver to use a comprehensive managed care delivery
model for primary and acute care services, known as the Statewide Medicaid Managed Care
(SMMC) Managed Medical Assistance (MMA) program. Florida also has a waiver under
Sections 1915(b) and (c) of the Social Security Act to operate the SMMC Long-Term Care
(LTC) program.
4
The Florida Medicaid program covers approximately 4.9 million low-income individuals,
including approximately 2.4 million, or 49.6 percent, of the children in Florida.
5
Medicaid is the
second largest single program funded in the state, behind public education, representing
approximately one-third of the total Fiscal Year 2023-2024 state budget.
6
As of September 2023,
Florida’s program is the 4th largest in the nation by enrollment and, for Fiscal Year 2021-2022,
the program is the 5th largest in terms of expenditures.
7
Florida delivers medical assistance to most Medicaid recipients – approximately 72 percent -
using a comprehensive managed care model, the SMMC program.
8
The SMMC program was
intended to provide comprehensive, coordinated benefits coverage to the Medicaid population,
leveraging economic incentives to ensure a level of provider participation and quality
performance that was impossible under the former, federally prescribed, fee-for-service delivery
model.
2
S. 409.905, F.S.
3
S. 409.906, F.S.
4
S. 409.964, F.S.
5
Agency for Health Care Administration, Florida Statewide Medicaid Monthly Enrollment Report, December 2023, available at
https://ahca.myflorida.com/medicaid/Finance/data_analytics/enrollment_report/index.shtml (last visited January 17, 2024)..
6
Chapter 2023-239, Laws of Fla.
7
The Henry J. Kaiser Family Foundation, State Health Facts, Total Medicaid Spending FY 2022 and Total Monthly Medicaid and CHIP Enrollment Sep.
2023, available at http://kff.org/statedata/ (last visited January 17, 2024).
8
Supra, note 5. BILL: HB 5301 Page 3
Supplemental Payment Programs
Federal Medicaid managed care programs are required to use actuarially sound capitation rates
which represent the entirety of the Medicaid expenditures for such services. However, federal
law or Florida waiver approvals authorize certain exceptions, allowing additional Medicaid
payments to take place outside the managed care relationship for some provider types. These
arrangements are called supplemental payment programs.
Florida currently has ten supplemental payment programs to fund payments to Medicaid
providers that are in addition to reimbursement they receive for services rendered to Medicaid
enrollees. They are either authorized by statute or by the General Appropriations Act and are
approved by the federal government. Non-General Revenue sources are used for the state share
of Medicaid funds, which is used to draw down the federal matching payment. However, some
supplemental payments are funded through General Revenue.
Intergovernmental Transfers
Certain programs, including but not limited to the Statewide Medicaid Residency Program, the
Graduate Medical Education Startup Bonus Program, the Disproportionate Share Hospital
(DSH), and certain hospital reimbursement exemptions are funded through county and other
local tax dollars that are transferred to the state and used to draw federal match. Local dollars
transferred to the state and used in this way are known as “intergovernmental transfers” or IGTs.
IGTs may be used to augment hospital payments in other ways, specifically through direct
payment programs authorized by the federal Centers for Medicare and Medicaid Services (CMS)
through waivers or state plan amendments. Examples include the Hospital Directed Payment
Program (DPP) and Low Income Pool (LIP) programs. All IGTs are contingent upon the
willingness of counties and other local taxing authorities to transfer funds to the state in order to
draw down federal match. The local taxing authorities commit to sending these funds to the state
in the form of an executed Letter of Agreement with the AHCA. In order for the AHCA to make
timely payments to hospitals, the AHCA must know which local governments will be submitting
IGTs and the amount of the funds prior to using the funds to draw the federal match.
Current law requires local governments who will be submitting IGTs to submit to the AHCA the
final executed letter of agreement containing the total amount of the IGTs authorized by the
entity, no later than October 1 of each year.
9
Funds outlined in the letters of agreement must be
received by the AHCA no later than October 31 of each fiscal year in which such funds are
pledged, unless an alternative plan is specifically approved by the agency.
10
Low Income Pool
The terms and conditions of the federal CMS Florida Managed Medical Assistance Waiver
Approval Document created a Low Income Pool (LIP) to be used to provide supplemental
payments to providers who provide services to Medicaid and uninsured patients. This pool
constituted a new method for such supplemental payments, different from the prior program
called Upper Payment Limit. The LIP program also authorized supplemental Medicaid payments
9
S. 409.908(26), F.S.
10
Id. BILL: HB 5301 Page 4
to provider access systems, such as federally qualified health centers, county health departments,
and hospital primary care programs, to cover the cost of providing services to Medicaid
recipients, the uninsured and the underinsured.
Hospital Directed Payment Program
The Hospital Directed Payment Program (DPP) was authorized in the state fiscal year 2021-2022
General Appropriations Act
11,
and provides directed payment to hospitals in an amount up to the
Medicaid shortfall, or the difference between the cost of providing care to Medicaid-eligible
patients and the payments received for those services.
12
The payment arrangement directs payments within each Medicaid region, to all hospitals in each
class by an equal percentage for hospital services provided by hospitals and paid by Medicaid
health plans. The DPP operates regionally. Each region’s DPP operates independent of other
regions once certain conditions are met.
13
Participating hospitals must meet the following three criteria:
Fall into one of the following three mutually exclusive provider classes:
o Private hospitals;
o Public hospitals; or
o Cancer hospitals
Operate in one of Florida’s 11 SMMC regions; and
Provide inpatient and outpatient hospital services to Florida Medicaid managed care
enrollees.
14
For a region to participate in the DPP, all hospitals in at least one of the classes (private, public,
cancer hospitals) within that region must agree to participate and be subject to an assessment to
fund the state share of the DPP.
The DPP funding is contingent on Local Provider Participation Funds and IGTs. Private
hospitals in the State of Florida must be partnered with a governmental entity in order to
participate in the DPP. The hospital DPP is a local option that allows local governments to
establish a non-ad valorem (non-property tax) special assessment that is charged solely to
hospitals.
Indirect Graduate Medical Education
The Indirect Graduate Medical Education (IME) program was authorized in the state fiscal year
2021-2022 General Appropriations Act, for the purpose of supporting hospitals with residents in
graduate medical education (GME) who are in training to become physicians.
15
The IME
program covers ancillary costs associated with the educational process and the higher case-mix
11
Chapter 2021-36, Laws of Fla.
12
Agency for Health Care Administration, Presentation to the House Health Care Appropriations Subcommittee, Medicaid Reimbursement Rates and
Supplemental Payment Programs, available at https://ahca.myflorida.com/content/download/20776/file/House_HHS_Approps-
Medicaid_Supplemental_Programs_Overview.pdf (last visited January 17, 2024).
13
Id.
14
Id.
15
Id. BILL: HB 5301 Page 5
intensity of teaching hospitals with residency programs that may result in higher patient care
costs relative to non-teaching hospitals.
16
An eligible teaching hospital must have a resident to bed ratio between 0.1 percent and 100
percent and meet the criteria for at least one of the following groups:
17
Academic Medical Centers Group 1 (AMC 1)
o Statutory teaching hospital with greater than 650 beds per license and
Greater than 500 FTEs; or
Affiliated with the University of Florida Health.
Public Teaching Hospitals
o Public hospital with residents in an approved GME program and is not classified as a
statutory teaching hospital.
Academic Medical Centers Group 2 (AMC 2)
o Statutory teaching hospital with greater than 650 beds per license.
Children’s Teaching Hospitals
o Children’s hospital that is excluded from the Medicare prospective payment system, or
o Regional Perinatal Intensive Care Center that does not meet the eligibility qualifications
of the AMC1, AMC2 or Public Teaching Hospital groups.
Statutory Teaching Hospitals
o Statutory teaching hospital with at least 200 beds per license which does not meet the
requirements of AMC1, AMC2, Public Teaching Hospitals, or Children’s Teaching
Hospital groups.
IME payment amounts are determined by a distribution model, by hospital grouping, calculated
using the most recently filed and available Medicare Cost Report extracted from the Healthcare
Cost Report. Providers are reimbursed on a quarterly basis, based on the hospital’s IME costs for
services provided.
18
III. Effect of Proposed Changes:
Section 1 amends s. 409.901, F.S., to codify definitions for three existing Medicaid supplemental
payment programs: Hospital Directed Payment Program (DPP), Indirect Graduate Medical
Education Program (IME), and Low Income Pool (LIP).
Section 2 amends s. 409.908, F.S., to require participation in the DPP as a precondition to the
hospital’s participation in the LIP or IME programs. The bill specifies that this requirement does
not apply to cancer hospitals, public hospitals, medical school physician practices, federally
qualified health centers, rural health clinics, or behavioral health providers.
Section 3 amends s. 409.910, F.S., to conform cross references to the changes made in the bill.
Section 4 provides an effective date of July 1, 2024.
16
Centers for Medicare and Medicaid Services, Appendix F to Florida Title XIX Inpatient Hospital Reimbursement Plan, May 4, 2023, on file with the
Senate Committee on Appropriations.
17
Id.
18
Id. BILL: HB 5301 Page 6
IV. Constitutional Issues:
A. Municipality/County Mandates Restrictions:
None.
B. Public Records/Open Meetings Issues:
None.
C. Trust Funds Restrictions:
None.
D. State Tax or Fee Increases:
None.
E. Other Constitutional Issues:
None.
V. Fiscal Impact Statement:
A. Tax/Fee Issues:
None.
B. Private Sector Impact:
The bill would have an indeterminate negative fiscal impact on hospitals that currently
participate in the Low Income Pool (LIP) and Indirect Graduate Medical Education
(IME) programs but do not participate in the Hospital Directed Payment Program (DPP).
The bill’s requirement of DPP participation as a precondition to LIP and IME
participation would reduce revenue to hospitals that currently receive LIP and IME
supplemental payments, unless those hospitals also participate in DPP.
C. Government Sector Impact:
None.
VI. Technical Deficiencies:
None.
VII. Related Issues:
None. BILL: HB 5301 Page 7
VIII. Statutes Affected:
This bill substantially amends the following sections of the Florida Statutes: 409.901, 409.908,
and 409.910.
IX. Additional Information:
A. Committee Substitute – Statement of Changes:
(Summarizing differences between the Committee Substitute and the prior version of the bill.)
None.
B. Amendments:
None.
This Senate Bill Analysis does not reflect the intent or official position of the bill’s introducer or the Florida Senate.