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LTSS Roadmap - Understanding the Reimbursement Process

Guidance for the LTSS roadmap planning model, which can help communities through the planning process to establish long-term services and supports or improve its current program.

Issued by: Centers for Medicare & Medicaid Services (CMS)

Issue Date: August 03, 2016

Learning which reimbursement rates may be available to your LTSS program, and understanding the advantages and disadvantages of each one, is highly complex. An experienced accountant or financial expert with your Tribe should assist in determining which rate is most beneficial for your Tribe’s situation.

Reimbursement Rates

Medical Assistance (MA) Rate The MA rate refers generally to your state's standard reimbursement for Medicaid-covered services Each state defines how it will reimburse services provided to Medicaid recipients, choosing from rates like fee-for-service or managed care rates Tribes can negotiate with their state for an "enhanced" reimbursement rate for Medicaid-covered servcies, based on 100% FMAP or other factors. An enhanced rate is higher than the standard MA rate. Learn more about financing and reimbursement processes for Medicaid at CMS.gov	Capitated Rate A contracted rate based on the total number of eligible persons in a service area. This funding is supplied in advance, creating a pool of funds from which to provide services. Because it is based on eligible population, along with other demographic factors, it can be a more beneficial rate for providers that have a larger client base rather than a smaller client base. Alternately, a capitated rate is a challenge when serving high-expense or catastrophic cases. The PACE program is an example of a fully capitated program. Read more about the PACE program.
Fee-for-service Rate Reimburses providers for each specific service provided, rather than a set fee for the whole encounter. A fee-for-service rate is the opposite of an all-inclusive rate.	Medicaid Waiver Rates Services covered by Medicaid waivers may be funded at a different rate than a state's standard MA rate Waivers offer services for people meeting special qualifications. Learn more about Medicaid waivers.
Managed Care Rate Many States use managed care organizations (MCOs) to deliver Medicaid, and more states are joining this trend. Managed care funding is based on a capitated reimbursement rate determined by the number of people enrolled in the system. Managed care models are increasingly being used by States for the delivery of LTSS, especially based on new LTSS opportunities defined in the Affordable Care Act. Read more on Managed Long Term Services and Supports (MLTSS) at medicaid.gov	Critical Access Hospital Rate Some tribal facilities may qualify as critical access hospitals. Qualifications include: Medicare participation no more than 25 inpatient beds short average hospital stays offering 24/7 emergency care a rural location LTSS delivered through a Critical Access Hospital facility may qualify for different reimbursement rates Reimbursement rates are cost-basis, rather than Medicare standard reimbursement rates Learn more about Critical Access Hospitals.
IHS Rate Rate at which CMS reimburses IHS and tribal facilities for Medicaid reimbursable services Can be referred to as “the all-inclusive rate,” but both IHS and FQHC rates are all-inclusive, with billing by encounters, not by specific services Mandated by Department of Health and Human Services and published yearly in the Federal Register Covers a variety of services, but list of allowable services may not match State allowable services The IHS reimbursement rate is published yearly in the Federal Register. See 2012 rate (corrected).	Federally Qualified Health Center (FQHC) Rate Covers Medicaid and Medicare patients Like the IHS rate, this is an all-inclusive per-visit payment—based on “encounters” A variety of services are covered, but allowable expenses vary by State Tribal organizations automatically qualify as FHQCs State and Tribe must negotiate the exact reimbursement rate Tribes using the FQHC rate may be able to include the cost of waiver-covered LTSS services in annual cost reports, even though not all LTSS counts as an "encounter" See the FQHC Fact Sheet from cms.gov to learn more. (PDF)

Reimbursement Rate Ranges and Considerations

Medicaid reimbursement rates can vary greatly, depending on state policies and other factors. But there is a federally established maximum and minimum that a tribe's reimbursement rate must fall between.

Upper Payment Limit

Federal limit placed on fee-for-service reimbursement of Medicaid providers
State Medicaid programs cannot claim Federal matching dollars for provider payments higher than the UPL

Enhanced Rate

A higher reimbursement rate (higher than the standard MA rate) that may be negotiated between a state and a tribe
Enhanced rate is a general term and does not refer to a specific amount

Cost-Basis Rate

Based on reasonable costs as reported in a facility's previous-year annual cost report
Cannot be lower than PPS rate, the base rate

Prospective Payment System (PPS) Rate

Nationwide rate (not based on regional pricing or a clinic’s past-year financial data)
Minimum reimbursement rate for Medicaid services

Reimbursement Range

Example: Comparing the IHS and FQHC Rates

The IHS rate and the FQHC rate may both be available to a tribal health facility or LTSS program. Both are "all-inclusive," which means the calculation of these rates account for all of the allowable costs of providing care. Many tribal health facilities can qualify as an FQHC, so health programs may have the option to choose between the IHS rate and the FQHC rate. However, your state may offer different rate options.

Even though the IHS rate and the FQHC rate are both all-inclusive rates, they cover different services at different rates, which can result in very different reimbursements for a facility. This comparison gives an example of important differences between different reimbursement rates.

Pharmacy visits count as a reimbursable encounter under the IHS rate, but are only reimbursed at the “filling” rate (a lower rate) under the FQHC rate. Understanding your current or potential FQHC rate and your program’s pharmacy utilization patterns will assist in determining whether the FQHC rate or the IHS rate will provide the highest level of reimbursement to your program.
Other factors to consider when choosing FQHC or IHS rate:
- Non-AI/AN patient population: Services provided to non-AI/AN patients can be reimbursed using the FQHC rate but cannot be billed using the IHS rate.

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DISCLAIMER: The contents of this database lack the force and effect of law, except as authorized by law (including Medicare Advantage Rate Announcements and Advance Notices) or as specifically incorporated into a contract. The Department may not cite, use, or rely on any guidance that is not posted on the guidance repository, except to establish historical facts.