As Medicaid Unwinds, Hospitals Seek Relief from DSH Payment Cut

Hospital and health system advocates are calling on lawmakers to stop an $8 billion cut to Medicaid Disproportionate Share (DSH) payments to safety-net hospitals.

A letter sent to Congressional leaders earlier this week urges the lawmakers to address the Medicaid DSH cuts slated to start on Oct. 1, 2023, after years of delay. The cuts to the Medicaid DSH program were part of the Affordable Care Act (ACA), which assumed gains in insurance coverage through state Medicaid expansion and other provisions of the law would reduce hospital uncompensated care costs.

Coverage rates envisioned by the ACA have not been fully realized, said signatories, including the American Hospital Association (AHA), Federation of American Hospitals (FAH), and America’s Essential Hosptials.

Furthermore, states are in the process of unwinding the pandemic-era Medicaid continuous enrollment provision, which could leave many people without insurance coverage moving forward, they stated.

Between 5 million and 14 million people are expected to lose Medicaid coverage once the continuous enrollment provision ends when the COVID-19 public health emergency expires in May, reports the Kaiser Family Foundation.

“Now is not the time for additional cuts to Medicaid funding, as hospitals are facing continued financial hardships while the country emerges from the COVID-19 pandemic,” the hospital groups wrote in the letter.

Congress has delayed the Medicaid DSH cuts nine times. Congress also eliminated the first year of cuts as part of the Coronavirus Aid, Relief, and Economic Security Act. Without further government intervention, hospitals face cuts from the 2024 fiscal year through the 2027 fiscal year.

Medicaid DSH payments support hospitals that treat a large number of Medicaid beneficiaries and uninsured patients. The payments offset uncompensated care costs incurred from treating these individuals.

More than 2,500 hospitals in the US receive DSH payments to address the Medicaid underpayment and uncompensated care, the hospital groups said in the letter. Payment cuts could negatively impact patient access to care, including critical community services, such as trauma, burn care and high-risk neonatal care.

The groups wrote that cuts to the Medicaid DSH payment could affect hospital preparedness for natural disasters and pandemic events.