Supplemental Payment Programs

Upper Payment Limit

Upper Payment Limit are supplemental payments to hospitals that have always been restricted to fee-for-service payments. By federal rule, UPL payments allow states to make up the difference between a reasonable estimate of what Medicare would pay and Medicaid payments (in aggregate within a type and class of provider). Texas had a hospital UPL payment program, but it ended when these services were included in managed care.

Uncompensated Care

Uncompensated Care payments to hospitals are authorized under Section 1115 demonstrations. UC payments originated as a way for Texas to continue to expand managed care in Medicaid programs and continue making supplemental payments to hospitals. States negotiate the parameters of their uncompensated care pools with the Centers for Medicare and Medicaid Services. 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 definition of “medical assistance” defined in federal law.
Who participates? public and private hospitals, public ambulance providers, government dental providers and physician practice groups.
Source of funding: Local government funds and federal funds

Disproportionate Share Hospital

Disproportionate Share Hospital payments are authorized by federal law to provide hospitals that serve a large share of Medicaid and low-income patients with additional funding. DSH payments are supplemental payments to 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.

Who participates? Hospitals that provide care to a high percentage of Medicaid and/or indigent patients.

Source of funding: Local government funds and federal funds

Relationship to other supplemental payments – DSH payments are the only Medicaid payment in federal law that is explicitly for paying the unpaid costs of care for uninsured patients. It can be used by states to offset or make up for low Medicaid base payments. However, it is 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 a reduction in its uncompensated care costs for which DSH pays.

Public Health Providers – Charity Care Pool

The Public Health Providers Charity Care Pool will allow eligible providers to receive a supplemental payment for certain medical services. Payments are authorized under the Section 1115 Waiver that was renewed on January 15, 2021. Eligible providers include: publicly owned and operated community mental health clinics, local behavioral health authorities or local mental health authorities, local health departments and Public Health Districts. Payments from the pool are to defray the uncompensated care costs for medical services provided to Medicaid-enrolled or uninsured persons. Total funding will not exceed $500 million (total computable) in each of the first two years of the program. In future years, this pool is subject to resizing based on actual charity care costs incurred by the eligible providers. The program will begin operating October 1, 2021.

Graduate Medical Education

Graduate Medical Education are supplemental payments to 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. 

Who participates? State-owned teaching hospitals and non-state owned and operated government teaching hospitals.

Source of funding: The source of the non-federal share of GME supplemental payments depends on the type of teaching hospital. State-owned teaching hospitals use state General Revenue as the source of the non-federal share. All other teaching hospitals rely on local entities, like hospital districts and counties, to use local public dollars as the non-federal share of such a payment. These local public funds are transferred to HHSC through an intergovernmental transfer.

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

Ambulance Average Commercial Reimbursement

The Ambulance Average Commercial Reimbursement Supplemental Payment Program is an enhanced supplemental payment program for publicly owned ground emergency ambulance providers in Medicaid Fee-for-Service. This program will allow the 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 enhanced supplemental payment program, providers must apply to HHSC and submit cost and payment data for paid Medicaid and commercial claims for specific procedure codes.