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Essential Hospitals Rely on Medicaid DSH

As the foundation of our health care safety net, essential hospitals share a mission to ensure all people, especially the vulnerable, can access high-quality care. This mission means essential hospitals shoulder a disproportionate share of unreimbursed care: They constitute 5 percent of all U.S. hospitals but provide more than 15 percent of uncompensated care and 23 percent of charity care nationally. This leaves them with an average operating margin a third that of other U.S. hospitals. In normal times, essential hospitals rely on a patchwork of federal support, including Medicaid disproportionate share hospital (DSH) payments, which Congress established to help keep these hospitals financially stable.

Now, that stability is threatened. Essential hospitals serve patients and communities hit hardest by the COVID-19 outbreak. The ongoing spread of the virus, along with the recent spike in hospitalizations, has stressed hospital finances, resources, and staffing. On top of this, Medicaid DSH funding will be cut be $4 billion—a third of all program funding—unless Congress acts by December 11.

Congressional leaders for years have worked in a bipartisan manner to block DSH cuts and must act again to preserve this vital safety-net support.

  • More than 300 bipartisan House members, led by Reps. Eliot Engel (D-NY) and Pete Olson (R-TX), sent House leaders a letter urging them to delay the cuts by at least two years.
  • The House Committee on Energy and Commerce unanimously passed the Reauthorizing and Extending Community Health (REACH) Act, which would repeal $16 billion of DSH cuts in FYs 2020–2022.
  • Bipartisan leaders of the Senate Committee on Finance released a revised version of the Prescription Drug Pricing Reduction Act of 2019 that would cancel $12 billion in DSH cuts for FYs 2020 and 2021.
  • Congress passed, and the president signed, multiple government spending bills that delayed the $4 billion cut to Medicaid DSH for FY 2020.
  • The Coronavirus Aid, Relief, and Economic Security Act eliminated the $4 billion cut to Medicaid DSH in FY 2020 and reduced the $8 billion cut for FY 2021 by half, to $4 billion, and delayed its implementation until November 30, 2020.
  • Congress in September passed, and the president signed, a continuing resolution that delayed implementation of the FY 2021 cut to December 12, 2020.

Read Our View – Essential Hospitals Rely on Medicaid DSH

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