Essential hospitals’ mission means they provide a disproportionate share of unreimbursed care. They constitute about 5 percent of all U.S. hospitals but provide more than a quarter of charity care nationally. This leaves them with an average operating margin of −9.0 percent compared with −2.8 percent for other U.S. hospitals. Essential hospitals rely on patchwork public support, including Medicaid disproportionate share hospital (DSH) payments, which Congress created to stabilize these financially fragile hospitals.
The Affordable Care Act reduced Medicaid DSH payments to hospitals under the faulty assumption their uncompensated care costs would decrease as health care coverage increased. But the expected coverage increases did not occur, and an estimated 27.2 million Americans remain uninsured.
Recognizing this disparity, Congress has acted in a strongly bipartisan fashion more than a dozen times to delay or eliminate Medicaid DSH cuts, including most recently in March 2025, when lawmakers delayed the $8 billion fiscal year (FY) 2025 cut. Currently, $24 billion in cuts must be addressed. If Congress does not act by Sept. 30, 2025, $8 billion of cuts will take effect, devastating essential hospitals and the communities they serve. Further, an additional $8 billion of cuts in both FY 2027 and 2028 would add harm.
America’s Essential Hospitals appreciates the multitude of times Congress has acted in a bipartisan fashion to stop Medicaid DSH cuts. In the wake of drastic cuts to the Medicaid program through various provisions in H.R. 1, the One Big Beautiful Bill Act, any additional cuts to Medicaid are absolutely unsustainable for essential hospitals. We urge Congress to achieve a lasting solution to the threat of DSH cuts by acting before the Sept. 30, 2025, deadline to eliminate the remaining three years of cuts and preserve this vital safety net support.
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