Hospitals Concerned About Proposed DSH Payment Cuts in Health Reform

Congress was listening. However, the sections of the House and Senate bills vary in relation to Medicare and Medicaid DSH payments:

• In the Medicare section of the Senate bill, DSH payments would be lowered initially by 75% in fiscal 2015; however, these payments would be subsequently increased based on the percentage of the population uninsured and the amount of uncompensated care provided.
• In the House bill, beginning in 2017, reducing Medicare DSH payments to hospitals would take into consideration the national rate of uninsurance, based on the Health and Human Secretary's recommendations.
• In the Senate bill for Medicaid, a state's DSH allotment (effective in 2011) would be reduced by 50%, or 25% for low DSH states once the state's uninsured rate decreases by at least 45%. DSH allotments would be further reduced—not to fall below 50% of the total allotment in 2012—if states' uninsured rates continue to decrease.
• In the House bill, Medicaid DSH allotments would be reduced by a total of $10 billion—$1.5 billion in 2017; $2.5 billion in 2018; and $6 billion in 2019. The largest percentage reductions in state DSH allotments would be made in states with the lowest uninsured rates and those that do not target DSH payments.

One exemption under the Senate bill is Hawaii: the bill would permanently restore Hawaii's Medicaid DSH allotment—because it did not have a permanent DSH allotment in previous years under the structure of its Medicaid program.