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Disproportionate Share Hospital Payments: A Minibus Rider

As a part of our ongoing blog series we have provided details on the structure, funding, and outlook of several expiring health care provisions, that we’ve referred to as the health care minibus. The minibus includes all of the health care extenders left behind from the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). Health care extenders refer to a number of temporary policies that need reauthorization or annual appropriations, including but not limited to, the Children’s Health Insurance Program (CHIP), the Maternal, Infant, and Early Childhood Home Visiting (MIECHV) program, community health center funding, therapy caps, special needs plans (SNPs), and Medicaid disproportionate share hospital (DSH) payment reductions.

In this post we will discuss Medicaid DSH funding cuts and recent activity to address such cuts.

Overview of Issue

Medicaid DSH payments are Medicaid payments made to hospitals that serve a high proportion of Medicaid, low-income, and uninsured patients. Medicaid DSH payments help offset the cost of uncompensated and undercompensated care.

The Affordable Care Act (ACA) reduced federal Medicaid DSH allotments to account for decreases in uncompensated care anticipated as a result of the Medicaid expansion. However, not all states expanded Medicaid, meaning some states face greater pressure to reimburse DSH hospitals treating low-income and uninsured patients.

Congress has acted several times to modify and delay cuts to the program, most recently through MACRA, which delayed scheduled cuts for until September 30, 2017, with DSH cuts implemented each year until FY 2025.

If Congress does not delay or repeal the Medicaid DSH cuts, hospitals receiving DSH payments would see a reduction of approximately $2 billion in FY 2018.

Recent Activity on Medicaid DSH Cuts

There is some activity on Capitol Hill to address Medicaid DSH cuts. The House HEALTHLY KIDS Act eliminates Medicaid DSH cuts for FY 2018 but it does extend Medicaid DSH cuts for FY 2026 and 2027. Additionally, last week during the Senate and House mark-ups of their respective CHIP bills, amendments were introduced but then withdrawn or not agreed to relating to DSH. Senator Johnny Isakson (R-GA) introduced two amendments to the KIDS Act relating to DSH. The first would have eliminated DSH cuts in FY 2018 and 2019 but extended cuts to FY 2026 with a $5 billion reduction that year. The second would have eliminated DSH cuts in FY 2018 and 2019 but have extended cuts to FY 2026 and 2027 with a $8 billion reduction each year. It would also create a fund that would bring states with a below average DSH allotment per uninsured person up to the national average. On the House side, Rep. Eliot Engel (D-NY) introduced an amendment related relating to DSH, which would have eliminated DSH cuts for FY 2018 and 2019 but extended DSH cuts to FY 2026 and 2027.

We will continue to report on developments in this area as they arise, so watch this space.

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