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A Local Provider Participation Fund (LPPF) ordinance allows a local government to impose a uniform, non-ad valorem special assessment on hospitals that have a property interest in the jurisdiction. Funds collected through the LPPF assessments are sent to the state through intergovernmental transfers (IGTs) to support the non-federal share of increased Medicaid managed-care payments for eligible hospitals. This non- federal share receives a federal match.

Currently, 26 Florida counties have adopted ordinances establishing LPPFs to help contribute to the non-federal share. They range from Escambia to Miami-Dade and include all 9 Statewide Medicaid Managed Care Regions in the State.

The Low-Income Pool (LIP) program reimburses hospitals for charity care costs incurred when treating uninsured patients who cannot afford medical care and services. Local governments, including counties, hospital taxing districts and other state agencies, fund the non-federal share of the $2.167 billion LIP program. In 2021, the Centers for Medicare and Medicaid Services (CMS) approved Florida’s LIP program through June 30, 2030.

The Directed Payment Program (DPP) reimburses hospitals for inpatient, and outpatient medical care and services provided to Medicaid enrollees. The program collects IGTs as the non-federal/state match to draw down federal Medicaid matching dollars—not requiring additional General Revenue from the state’s budget. A DPP is a mechanism authorized by CMS that allows states with Medicaid Managed Care waivers to seek approval from CMS to direct managed care plans to make certain payments.

The Indirect Graduate Medical Education (IME) program reimburses eligible teaching hospitals participating in Graduate Medical Education for costs associated with educating and training new residents. This funding includes a combination of both IGTs and federal dollars.

The Graduate Medical Education (GME) Statewide Medicaid Residency Program is used to provide funding to qualified participating hospitals involved in graduate medical education. Additionally, the GME Startup Bonus Program provides additional funding to qualifying hospitals with newly approved residency positions in the statewide supply- and-demand deficit specialties.

The Florida Cancer Hospital Program (FCHP) is a directed payment program, similar to DPP, that provides eligible cancer hospitals an enhanced reimbursement for inpatient and outpatient hospital care and services.

A disproportionate share hospital (DSH) is one that treats a large number of low-income patients who are uninsured or Medicaid enrollees. DSH funding is used to help such hospitals cover the cost of providing medical care and services to these patients.

Medicaid is jointly financed by states and the federal government. The federal government matches state Medicaid spending, but the federal match rate varies by state based on a federal formula called The Federal Medical Assistance Percentage (FMAP). The FMAP ranges from 50% on the dollar to a high of 78% for FY2022.

In 2017, Medicaid was the second-largest item in state budgets. Federal Medicaid matching funds are the largest source of federal revenue (55.1%) in state budgets. Accounting for state and federal funds, Medicaid accounts for 26.5% of total state spending. Nationally, Medicaid pays for 1 in 6 dollars in the healthcare system and 1 in 2 dollars in long-term services and support.

States are obligated to contribute at least 40% of their Medicaid budget from state general revenue. The remaining 60% can come from other permissible sources, provided the sources are compliant with federal law. For example, states have some flexibility to use funding from transfers from local governments (intergovernmental transfers) or revenue collected from provider taxes and fees to help finance the state share of Medicaid. Provider taxes can also be known as assessments, fees, or mandatory payments, and can vary in structure in accordance with state law requirements. However, federal law requires that, whatever the name and local variation, all such collections from providers must be must be broad-based, uniformly applied, and the collecting governmental entity may not take any action to offset the costs of these payments or otherwise hold the providers harmless. All states (except Alaska) have at least one provider tax in place, and many states have more than three.

The Federal Medical Assistance Percentage (FMAP) is used to calculate the amount of federal share of state Medicaid program expenditures. The amount of FMAP varies from state to state and is updated annually.

The FMAP formula is based on the ratio of the state per capita income to the national per capital income using the three most recent calendar years for which satisfactory data are available from the Department of Commerce, Bureau of Economic Analysis. The lower the state's average per capita income, the higher the FMAP. The higher the state's average per capita income, the lower the FMAP.

All states receive at least 50% FMAP.

An intergovernmental transfer (IGT) is the transfer of funds from a governmental entity, such as counties, municipalities, local health care taxing districts, and providers operated by state or local governments. In Florida, IGTs are used to help fund the state’s share of Medicaid financing. The IGTs are combined with other state funds to draw down federal matching funds based on the FMAP.

The Agency for Health Care Administration (ACHA) is responsible for collecting IGTs and adding those funds to the state’s share of the Medicaid funding in Florida.

In Florida, hospitals are only reimbursed approximately $0.60 for every $1.00 they spend to care for Medicaid patients. The difference between the actual cost to provide care to a Medicaid beneficiary and the payment the hospital receives in reimbursement is the “Medicaid shortfall.” Before the COVID-19 pandemic, Florida’s Medicaid total shortfall amounted to $2.33 billion per year. The impact of the pandemic exacerbated this problem. The shortfall for Florida's hospitals now totals over $4 billion, bringing the crisis to a boiling point. The DPP makes additional funding available to address the financial uncertainty caused by the shortfall. In 2021 alone, the DPP will bring a total of $1.2 billion in federal dollars to most regions in Florida to help close the Medicaid shortfall.

The state share of the Hospital Medicaid payment arrangement is partially funded through provider assessments levied by local governments. This ensures that the non-federal share for the DPP is paid by hospitals, not by increasing taxes on Florida residents. The assessment is based on the amount needed to fund the cost of the rate increases to the hospitals in that area. Revenue from the special assessment is deposited into a Local Provider Participation Fund (LPPF) and is matched with federal funds to provide Florida hospitals with supplemental Medicaid reimbursement to offset the shortfall.

The DPP has been endorsed by Governor DeSantis and Florida’s legislative leadership as a top priority and an innovative solution to a difficult problem

In Florida, hospitals are only reimbursed approximately $0.60 for every $1.00 they spend to care for Medicaid patients. The difference between the actual cost to provide care to a Medicaid beneficiary and the payment the hospital receives in reimbursement is the “Medicaid shortfall.” Before the COVID-19 pandemic, Florida’s Medicaid total shortfall amounted to $2.33 billion per year. The impact of the pandemic exacerbated this problem. The shortfall for Florida's hospitals now totals over $4 billion, bringing the crisis to a boiling point. The DPP makes additional funding available to address the financial uncertainty caused by the shortfall. In 2021 alone, the DPP will bring a total of $1.2 billion in federal dollars to most regions in Florida to help close the Medicaid shortfall.

The state share of the Hospital Medicaid payment arrangement is partially funded through provider assessments levied by local governments. This ensures that the non-federal share for the DPP is paid by hospitals, not by increasing taxes on Florida residents. The assessment is based on the amount needed to fund the cost of the rate increases to the hospitals in that area. Revenue from the special assessment is deposited into a Local Provider Participation Fund (LPPF) and is matched with federal funds to provide Florida hospitals with supplemental Medicaid reimbursement to offset the shortfall.

A Local Provider Participation Fund (LPPF) ordinance allows a local government to impose a uniform, non-ad valorem special assessment on hospitals that have a property interest in the jurisdiction.

Funds collected through the LPPF assessments are sent to the state through IGTs to support the non-federal share of increased Medicaid managed-care payments for eligible hospitals. This non- federal share receives a federal match.

Currently, 15 Florida counties have adopted ordinances establishing LPPFs to help contribute to the non-federal share. They range from Escambia to Miami-Dade and include 8 of the 11 Medicaid Managed Care Regions in the State.

Click here to view an interactive map and resources of Florida's LPPFs.