The Medicaid Disproportionate Share Hospital (DSH) program was created in 1981 to help hospitals offset two types of uncompensated care: Medicaid shortfalls and unpaid costs of providing care to uninsured individuals. AAMC-member teaching hospitals, while representing only 5% of the nation’s hospitals, provide 31% of all hospital charity care and 25% of all Medicaid hospitalizations. Cuts to the Medicaid DSH program would be particularly harmful to these hospitals.
Based on the assumption of increased coverage and reduced uncompensated care costs, the Affordable Care Act (ACA) required a reduction in the Medicaid DSH allotments. However, for the first time since the implementation of the ACA in 2014, the number of uninsured people increased in 2017. That same year, major teaching hospitals provided more than $11 billion in uncompensated care. Medicaid DSH payments are a vital source of funding that offsets a portion of that cost.