Aligning Medicaid’s Supplemental Payments with the Goals of Value-Based Purchasing

Medicaid’s supplemental payments to safety-net hospitals have grown in importance over the years as a way for states to make up for the program’s historically low reimbursement rates. Because they are typically not tied to health care quality, costs, or outcomes, however, the payments can detract from states’ efforts to support value-based purchasing. In a new Commonwealth Fund report, analysts with Manatt, Phelps & Phillips examine states’ and hospitals’ reliance on these funds, the potential impact of new federal rules, and ways that supplemental payments might be redeployed.