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 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 multiple times during end-of-year funding negotiations in December 2024, and, most recently, in the continuing resolution that delayed the cut until April 1.
America’s Essential Hospitals appreciates the bipartisan efforts in the 118th Congress and earlier to stop Medicaid DSH cuts. Now, we urge Congress to achieve a lasting solution to the threat of DSH cuts by acting before the April 1, 2025, deadline to eliminate the remaining three years of cuts and preserve this vital safety net support.
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