Medicare, Medicaid DSH Payment Methods Exacerbate Racial Disparities

Disproportionate share hospital (DSH) payments from Medicare and Medicaid may further racial disparities by basing allocations on patient healthcare use, a study published in JAMA Network Open found.

Medicare and Medicaid DSH payment programs provide $24 billion to hospitals every year to help support care and improve health outcomes for low-income patients. The programs base the distributions on patient characteristics that reflect healthcare utilization.

Racial and ethnic minority groups tend to face structural barriers to care, leading to lower healthcare utilization compared to other groups, even when these populations have similar healthcare needs.

Researchers gathered data on Medicare and Medicaid DSH payments to determine whether the payments made to hospitals in disproportionately Black counties were aligned with the financial and healthcare needs of the populations they serve.

The data was obtained from the 2019 Healthcare Cost Report Information System and 2015 State Plan Rate Year files and reflects information from all states except Massachusetts, which does not make Medicaid DSH payments.

Researchers assessed uncompensated care costs, the percentage of uninsured residents, mortality rates, and the percentage of people reporting fair or poor health to determine community needs.

Counties with the highest proportion of Black residents received a mean of $9 per resident in Medicare DSH payments and $52 per resident in Medicaid DSH payments. Other counties with fewer Black residents received $4 per resident in Medicare DSH payments and $20 per resident in Medicaid DSH payments.

Disproportionately Black counties that received the same level of DSH payments as other counties had higher rates of uncompensated care and worse population health, the study found.

For example, when keeping Medicare DSH payments per resident constant, uncompensated hospital care rates were 2 percentage points higher in disproportionately Black counties than other counties.

Additionally, the share of uninsured residents was 2.5 percentage points higher, there were 75.8 more deaths per 100,000 residents, and the share of residents reporting poor or fair health was 3.6 percentage points higher.

When Medicaid DSH payments were kept constant, counties with the largest share of Black residents also had higher rates of uncompensated care and premature mortality and more uninsured residents and residents reporting poor or fair health.

The study results indicate that DSH payments to Black communities are inconsistent with their healthcare needs. Basing DSH payments on measures that reflect healthcare use may put underserved communities at a disadvantage, researchers said.

“These findings suggest that policymakers should consider measures not based on healthcare use to ensure more equitable targeting of DSH payments or additional allocations to historically underserved communities,” the study concluded.