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.
Unless Congress acts, hospitals across the country will face a $4 billion cut in FY 2020 and $8 billion cut per year in FYs 2021-2025, totaling $44 billion in reductions over the six-year period. Cuts of this magnitude will impede critical services to the most vulnerable patients and communities.
In addition, the proposed implementation of the Medicaid DSH cuts is inappropriate. The Administration issued a proposed rule in 2017 that sets forth the methodology for Medicaid DSH allotment reductions. However, CMS has not yet finalized the rule, which means that states do not have the regulatory guidance for how to proceed. Additionally, the CMS-proposed methodology relies on five-year old Medicaid DSH audit and reporting data.
- Congress should eliminate or delay the scheduled cuts to the Medicaid DSH program.