Medicaid DSH
Medicaid disproportionate share hospitals (DSH) are hospitals that serve a large number of Medicaid and low-income uninsured patients. Recognizing the importance of DSH hospitals to the Medicaid program, states make additional payments (called DSH payments) to these hospitals “to improve the financial stability of safety-net hospitals and to preserve access to necessary health services for low-income patients.” (MACPAC, March 2014 Report to Congress)
Each state is allotted DSH funding according to a formula that is generally based on historical spending, increased to account for inflation; the states also have discretion in how DSH funding is distributed.
The ACA mandated cuts to Medicaid DSH based on the assumption that the ACA would expand Medicaid coverage to almost all non-elderly adults under the age of 65. This expansion would thereby reduce the number of uninsured individuals, and the cost to hospitals of caring for these individuals.
However, because Medicaid expansion is optional for states, the number of uninsured individuals still cared for by hospitals has not declined at the levels anticipated by the ACA.
Previous legislation has delayed impending DSH cuts, but DSH cuts of the magnitude contemplated in current law pose a significant risk to the Medicaid safety net at a time when demands on the program are growing and the responsibilities of hospitals to care for the uninsured have not abated.
FAH believes it is important for policymakers to continue to work to eliminate, or at a minimum, continue to delay these harmful cuts.
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