Since automatic increases in DSH spending are based on higher uninsured rates, the burden of uncompensated care will be partially offset by the increase in the amount of money a hospital receives, Matthew Fiedler, PhD, a fellow with the Center for Health Policy in the Brookings Institute’s Economic Studies Program, tells HealthLeaders Media in an interview.
“The uninsured rate will have a direct effect on the amount of uncompensated care and an indirect effect on the amount of DSH payments that are made, in Medicare at least, because the uninsured rate is part of the formula that determines how much DSH payments any given hospital is entitled to,” Fielder said.
DSH funding on eight-year reduction plan
In the original text of the ACA, federal funding reductions were planned for DSH payments to coincide with an expected decrease in the uninsured rate nationwide. The reductions were set to go into effect in fiscal year 2014 and last through fiscal year 2020, but legislation was passed in 2013 to postpone them until fiscal year 2018.
Despite the four-year layoff, nearly two-thirds of states did not sufficiently allocate their FY 2018 budgets for the scheduled reductions, according to the Kaiser Family Foundation. In July, CMS proposed a rule that ordered the beginning of reductions with $2 billion in FY 2018.
The current DSH reductions are projected to run through fiscal year 2025, totaling $43 billion.
The potential impact of changes to the DSH program on hospitals is unclear until Acting Secretary of Health and Human Services Eric Hargan makes cuts or redistributions of DSH allotments, says David Mosley, managing director with Navigant Healthcare in Atlanta, Georgia.
The impact will depend on the cost of people who utilized services without payment compared to the number of people who will be uninsured and eligible for DSH, Mosley tells HealthLeaders Media.
“I would love to have some wonderful prognostication,” Mosley says, “but the answer is there are a few variables out there that, until someone tells us the value of those variables, we don’t know.”
Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.