Medicaid financing and provider reimbursement models are extremely complex. As states search for ways to control Medicaid costs, understanding how public healthcare dollars flow to providers will be essential in analyzing options. There are several types of supplemental (i.e., separate from and in addition to direct payment for services) Medicaid payment; this updated explainer discusses upper payment limit (UPL) payments.
UPL payments are lump-sum payments that are intended to cover the difference between base Medicaid fee-for-service payments to a class of providers and the amount that Medicare would have paid for the same services. In Arkansas, UPL payments make up 96% of total hospital supplement payments. Consequently, policymakers should carefully consider reform options that disrupt or eliminate the flow of these payments.
This explainer provides information on the development of Medicaid UPL payments, details the UPL payment methodology for hospitals in Arkansas, and describes changes to UPL payments in relation to managed care.
