Florida hospitals need fair Medicaid payments now

Florida’s health care system is at an inflection point.

Hospitals across the state are doing everything they can to keep maternity units open, maintain inpatient psychiatric care, and preserve access to specialty children’s care — because Floridians depend on them. But they are working against the headwinds of Medicaid reimbursement amounts that cover only a fraction of the actual cost of care.

Hospitals are reimbursed for just 47% of the audited cost of labor and delivery services, 62% of inpatient pediatrics, and 49% of adult inpatient psychiatric care. That means hospitals face a shortfall for each of these services they provide. Realistically, these losses are not sustainable.

Florida’s proposed 2025 Medicaid State Directed Payment (SDP) program offers an essential lifeline to increase reimbursement amounts and more accurately reflect the costs of care. It is long past time for the federal Centers for Medicare & Medicaid Services (CMS) to approve it for the sake of the children, families, seniors, people with disabilities, employers, and entire communities who depend on a reliable health care system.

Yet, despite CMS’ approval of 32 other states’ hospital SDP preprints for FY 2025 and the beginning of approvals for FY 2026 preprints — many submitted after Florida’s — our state’s application remains inexplicably stalled.

This delay is not just bureaucratic — it is dangerous and compromises access to timely care for all Floridians.

Like 48 other states, Florida relies on a permissible provider tax to help increase Medicaid payments for underfunded services — an approach supported under federal law since the 1980s. The hospital provider tax functions like the gas tax for roads: hospitals contribute revenue that the state uses to draw down available federal matching dollars that Florida taxpayers have already paid into to fund SDPs. This funding mechanism protects Florida taxpayers from increased broad-based taxes to support these health care services for Medicaid enrollees.

States like Florida that require Medicaid beneficiaries to enroll in managed care can, through this federal SDP process, direct those insurance companies (plans) to increase payments to hospitals for services provided to Medicaid patients, often contingent on provider performance. Florida ties 6% of its SDP to improved performance on reducing the rates of C-sections, hospital readmissions, and improving transitions in care for individuals with mental illness.

Florida’s 2025 SDP proposal, submitted last May to the federal government, includes an updated provider tax and increased Medicaid reimbursement for hospitals to be more reflective of the cost of care. While future limits on provider taxes and SDPs apply under the One Big Beautiful Bill Act (OBBBA), they should not apply to Florida’s proposal submitted before OBBBA’s enactment.

In fact, Florida’s Congressional delegation worked to ensure the state could increase its SDP before new federal limits took effect. CMS has approved similar or larger programs in other states, including Illinois and Texas — even where litigation was pending. Florida’s hospitals are simply asking for the same consideration CMS has extended to nearly every other state.

SDPs and the provider tax that makes them possible are not a luxury or a bailout. They are a basic component of Medicaid financing and underpin access to care, not only for the vulnerable children, adults, and seniors who trust the Medicaid program for their health care, but also for all Floridians who expect the health care they need to be available when they need it.

The consequences of continuing to delay approval of Florida’s SDP program are already showing. As maternity, behavioral health, pediatric, and other Medicaid-underfunded services are reduced, Floridians increasingly must turn to emergency departments — the most resource-intensive point of entry into the health care system — raising, not lowering, federal health care spending.

Florida’s hospitals deserve fair payment and predictability to plan for workforce investment, expand physician and other clinician education and training programs, adopt new technology, and maintain high-quality care close to home. Floridians deserve care when and where they need it. Every additional day CMS delays approval of the state’s SDP program places these goals further out of reach.

CMS must act — now — and approve Florida’s SDP program.

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Mary C. Mayhew is president and CEO of the Florida Hospital Association.