Supplemental Payment Programs

Upper Payment Limit

An Upper Payment Limit (UPL) is a federal rule allowing states to offset the fee-for-service rates that states pay certain providers for health care services. States provide UPL supplemental payments to offset the difference between those rates and a reasonable estimate of what would be paid through Medicare (in aggregate within a type and class of medical provider). Texas discontinued a hospital UPL payment program after those services were added to managed care.

Uncompensated Care

Uncompensated Care (UC) payments originated as a way for Texas to continue expanding managed care in Medicaid programs and making supplemental payments to hospitals. Authorized under Section 1115 of the Social Security Act, states can negotiate the parameters of their UC pools with the Centers for Medicare and Medicaid Services (CMS). Texas UC payments may be used to reduce the actual uncompensated cost of medical services provided to uninsured individuals who meet a provider's charity care policy. The medical services must meet the federal definition of "medical assistance."

Eligible providers: Public and private hospitals, public ambulance providers, government dental providers and physician practice groups.

Source of funding: Local government and federal

Disproportionate Share Hospital

Disproportionate Share Hospital (DSH) payments are authorized by federal law to provide additional funding to hospitals that serve a large share of Medicaid and low-income patients. DSH payments help cover more of the cost of care for Medicaid and low-income patients. These payments cannot exceed a hospital's uncompensated costs for both Medicaid-enrolled and uninsured patients.

Eligible providers: Hospitals that provide care to a high percentage of Medicaid or indigent patients.

Source of funding: Local government and federal

Relationship to other supplemental payments: DSH payments are the only federally allowed Medicaid payment explicitly for the unpaid costs of care for uninsured patients. It can also be used by states to offset low Medicaid base payments. However, DSH payments are affected by Medicaid base payments and other supplemental funding. For example, an increase to a hospital's base Medicaid payment and to its other non-DSH supplemental funding may decrease a hospital's Medicaid shortfall and result in reducing its uncompensated care costs that are offset by DSH payments.

Public Health Providers – Charity Care Program

The Public Health Provider - Charity Care Program (PHP-CCP) reimburses qualifying providers for the cost of delivering certain health care services that are not reimbursed by another source. Health care services include behavioral health services, immunizations, public health services and other preventative services. Payments are authorized under the Section 1115 Waiver renewed on Jan. 15, 2021.

PHP-CCP payments are intended to help defray the uncompensated care costs for medical services provided to Medicaid-enrolled or uninsured persons. In the program's first year (Oct. 1, 2021, through Sept. 30, 2022), payments were used to defray uncompensated care costs, including a Medicaid shortfall and bad debt. In its second year beginning Oct. 1, 2022, the program transferred strictly to charity care. The total program funding will not exceed $500 million (total computable) in each of the first two years of the program. In future years, the PHP-CCP funding pool will be resized based on actual uncompensated charity care costs incurred by eligible providers.

Eligible providers: Publicly owned and operated community mental health clinics, local behavioral health authorities or local mental health authorities, local health departments and Public Health Districts.

Source of funding: Certified public expenditures.

Graduate Medical Education

Graduate Medical Education (GME) supplemental payments support medical residency training for medical school graduates at teaching hospitals. Teaching hospitals typically incur additional costs because they are a training site for medical school graduates to receive hands-on, practical experience in treating patients. In addition to medical residents' salary and benefits, teaching hospitals also incur additional costs for more testing and for treating sicker and more complex patients.

Eligible providers: State-owned teaching hospitals and non-state owned and operated government teaching hospitals.

Source of funding: State-owned teaching hospitals rely on state General Revenue for their non-federal share of GME supplemental payments. All other teaching hospitals rely on local entities, like hospital districts and counties, to use local public funds that are transferred to HHSC through an intergovernmental transfer (IGT).

Relationship to other supplemental payments: GME payments are considered Medicaid payments for the purposes of calculating Medicaid shortfall for DSH and UPL purposes.

Ambulance Services Supplemental Payment Program

The Ambulance Services Supplemental Payment Program is an enhanced program for publicly owned ground emergency ambulance providers that participate in the Medicaid fee-for-service model. This program allows publicly owned ground emergency services to become eligible for additional payments based on the average rate payable by commercial insurers for these same services. To participate in the program, providers must apply to HHSC and submit cost and payment data for specific procedure codes that are paid through Medicaid and commercial claims.

Hospital Augmented Reimbursement Program

The Hospital Augmented Reimbursement Program (HARP) is a statewide supplemental program providing Medicaid payments to hospitals for inpatient and outpatient services that serve Texas Medicaid patients under the fee-for-service model. The program serves as a financial transition for providers historically participating in the Delivery System Reform Incentive Payment program. HARP provides additional funding to hospitals to assist in offsetting the cost hospitals incur while providing Medicaid services. On Aug. 31, 2022, CMS approved HARP for non-state government-owned and -operated hospitals. The approval is retroactive to Oct. 1, 2021 (federal fiscal year 2022). A request by HHSC to implement HARP for private hospitals is pending approval by CMS.