Advocacy Alert

Urge Your Lawmakers to Support Essential Health System Designation

Essential Hospitals Rely on Medicaid DSH

May 10, 2024

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 −8.6 percent compared with −1.4 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 25.6 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 in March 2024, when lawmakers eliminated the $8 billion cut scheduled for fiscal year (FY) 2024. Congress also delayed the $8 billion FY 2025 cut until January 1, 2025, giving lawmakers time to address that cut between the election and the end of the year.

America’s Essential Hospitals appreciates these and earlier bipartisan efforts to stop Medicaid DSH cuts. Now, we urge Congress to achieve a lasting solution to the threat of DSH cuts by acting before the January 1, 2025, deadline to eliminate the remaining three years of cuts and preserve this vital safety net support.

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