Is It Time for a Mid-Course Correction for Medicaid DSH?

Is It Time for a Mid-Course Correction for Medicaid DSH?

Wednesday, February 27, 2019 | by Joan DaVanzo

Tags: ACA, DSH, Hospitals, Medicaid, Uninsured

The Patient Protection and Affordable Care Act (P.L. 111-148 as amended) required significant reductions to Medicaid payments to hospitals that serve a disproportionate share (DSH) of low-income and vulnerable patients starting in 2014. However, the start of Medicaid DSH payment cuts was delayed several times by policymakers. In 2013, Congress postponed the beginning of payment reductions to 2018, and budget bills in later years continued to postpone the cuts.

CMS is scheduled to begin cutting Medicaid DSH allotments to hospitals by $4 billion in the 2020 fiscal year. With the first year of cuts, hospitals will see reductions beginning on October 1 of 2019. The Agency plans to continue reducing the payments each year until 2025 when total Medicaid DSH payment reductions reach $44 billion, according to the Bipartisan Budget Act of 2018. CMS will have to publish a final rule describing its methodology for distributing federal DSH allotment reductions to individual states in FY 2020 and subsequent years.

At the time of passage, Congress assumed that Medicaid coverage expansions would substantially reduce the number of uninsured patients in the U.S. resulting in less hospital uncompensated care. The major ACA coverage provisions went into effect in 2014. From 2013 to 2014, the number of uninsured decreased by 13.3 million, a 32 percent decrease, with larger declines in Medicaid expansion states.[1]

However, in 2017, the number of uninsured people increased by nearly 700,000 people, the first increase since implementation of the ACA. Current efforts to alter the ACA or to make receipt of Medicaid contingent on work effort may further erode coverage gains seen under the ACA and in turn increase hospital uncompensated care. Furthermore, the use of HDHP in Marketplace plans and employer plans since the adoption of the ACA as well are adding to hospital uncompensated care for insured patients. Hospitals also may see shifts in patient acuity, Medicaid payment rate changes or other changes in Medicaid payment policy.[2] Given these conflicting trends it would seem prudent to re-examine Medicaid DSH and Medicaid payment policy as a whole to better understand the effect of its policies on U.S. hospital financial status.










[1],  [2] Cunningham P, Rudowitz R, Young K, et al. (2016) Understanding Medicaid Hospital Payments and the Impact of Recent Policy Changes. Henry J. Kaiser Family Foundation.





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