Medicaid is vital to children and children’s hospitals. It’s the single largest health insurer for children in the United States and children represent more than half of all Medicaid recipients.
Children’s hospitals provide about 45 percent of the hospital care required by children covered by Medicaid and almost all the hospital care for Medicaid-covered children with complex conditions. Medicaid is also the single largest payer of children’s hospitals’ patient care.
Medicaid, on average, pays for 56 percent of all inpatient days of care provided by children’s hospitals. However, Medicaid payments for services are inadequate, covering only about 76 percent of the cost of care, even after hospitals account for supplemental payments, such as disproportionate share hospital payments, that provide financial help to hospitals that treat a large number of Medicaid and uninsured patients.
In 1999, Congress enacted the Children’s Hospitals Graduate Medical Education (CHGME) program to provide children’s hospitals with federal graduate medical education (GME) support comparable to the GME support the federal government provides to adult teaching hospitals through Medicare. CHGME supports physician training at nearly 60 independent children’s teaching hospitals. Hospitals receiving CHGME funds train 40 percent of all pediatricians and 43 percent of all pediatric specialists.
The combination of President Barack Obama’s Patient Protection and Affordable Care Act of 2010 (PPACA) and the Health Care and Education Reconciliation Act of 2010 (HCERA) encompasses the culmination of a health reform effort that began in early 2009. Though the new health reform law has many positive aspects, children’s hospitals still face challenges to their financial viability, which impacts their ability to provide quality care.
The federal 340B drug pricing program provides access to a discounted price on outpatient prescription drugs to certain healthcare facilities, including hospitals serving a disproportionate share of Medicaid and uninsured patients.
Previously, children’s hospitals exempt from Medicare’s Prospective Payment System could not participate in the program despite their status as disproportionate share hospitals. In 2005, Congress enacted legislation to allow freestanding children’s hospitals to participate in the program.
On Sept. 1, 2009, the Health Resources Services Administration published the final guidelines on the inclusion of children’s hospitals in the federal 340B drug discount program.
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