Hospitals navigate delayed Medicaid payments: 5 notes
By Erica Carbajal / May 5, 2025
Hospitals in at least 10 states are experiencing delays in supplemental Medicaid payments from the federal government — a slowdown that has led some facilities to pause the expansion of services and halt payments to vendors, according to a May 2 report from The Wall Street Journal.
Five notes:
1. Hospital associations in at least 10 states told the news outlet that their members are experiencing delays in state-directed Medicaid payments from CMS, some of which date to fall 2024. Supplemental payments are a lifeline for hospitals that serve high volumes of Medicaid patients, helping offset base reimbursement rates that fall below the actual cost of providing care.
2. State-directed payments are funded jointly by states and the federal government. To raise their share, states often collect provider taxes — fees levied on hospitals and other healthcare providers. These funds are then matched by the federal government, with match rates ranging from $1 to $9 per state dollar, depending on the state. The total pool of funds is redistributed to hospitals through CMS-approved payment programs designed to bring Medicaid reimbursement rates closer to Medicare or commercial levels.
3. Some hospitals experiencing payment delays have laid off staff, halted planned service expansions or postponed payments to their medical suppliers. In Hawaii, 19 private hospitals are awaiting about $240 million in supplemental funds they had expected to begin receiving at the beginning of the year.
“There are tens of millions of dollars a month not coming to hospitals,” Hilton Raethel, CEO of the Healthcare Association of Hawaii, told the Journal. “They are depleting our cash reserves.”
4. In March, Valley Medical Center in Renton, Wash., laid off 101 employees after enhanced federal Medicaid benefits ended Dec. 31 without notice. The hospital had budgeted to receive between $80 million and $100 million in state-directed payments in 2025.
“We found out through the Washington State Hospital Association in February that the previous administration did not renew the program by January 20, 2025 and so far the current administration hasn’t approved it either for this calendar year,” the hospital said in a statement to Becker’s at the time.
5. CMS formally established state-directed payment programs in 2016. While just 10 states used them in 2017, 40 states had approved programs by 2024. Approved programs as of August 2024 were projected to disburse $110 billion annually — a nearly 60% increase over the previous year, according to the Medicaid and CHIP Payment and Access Commission.