DMAS Shares 2008 Inflation Factor

VHCA (4/25/2008)

Earlier this week, staff of the Department of Medical Assistance Services (DMAS) presented information to VHCA’s Payment for Services Committee.  Included in their presentation was the recently developed 2008 Medicaid cost rate (inflation) factor.  The factor, developed by Global Insight, is 2.8% before adjustment for budget cuts for state fiscal year 2009 and 2010.  The 2.8% factor came as a disappointing surprise given the prior estimate of 3.7% used by DMAS for inflation.

The 2.8% factor also represents a significant reduction from actual Medicaid inflation factors used for rate and cost ceiling calculations for nursing facilities in recent years.  The rates in effect for the most recent three years were 4.4% in 2005, 4.3% in 2006 and 3.4% in 2007.

VHCA is working with DMAS to better understand the decline in the update factor and to ensure that the calculation by Global Insight is accurate.  In connection with this effort, members of the Payment for Services Committee will be requested to complete a brief survey of changes in operating costs primarily between 2006 and 2007.

Providers should keep in mind that funding cuts contained in the Commonwealth’s 2009-2010 Budget will reduce the rates calculated using the 2.8% inflation factor.  DMAS will be issuing interim Medicaid rate letters next month.  These interim rates will include a 1.329% reduction adjustment – the amount stipulated in the Budget as required to achieve the targeted Medicaid savings of approximately $11.5 million annually.