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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. These hospitals protect communities with lifesaving services, such as trauma care, and reach outside their walls to influence the social and economic factors that affect health.

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 17 percent of uncompensated care and 23 percent of charity care. This leaves them with an average operating margin one-fifth that of other U.S. hospitals. So, essential hospitals rely on a patchwork of federal support—including Medicaid disproportionate share hospital (DSH) payments, which Congress created to help keep these hospitals financially stable.

Now, that stability is threatened. Unless Congress acts by May 22, Medicaid DSH will sustain a $4 billion cut—a third of all program funding. Rising numbers of uninsured and other cost pressures, including deep cuts to outpatient payments, would amplify the damage. Congress delayed the DSH cut three times in 2019 and must act again to protect access to care.

Those delays and other action in 2019 came with strong bipartisan 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 (H.R. 2328), which would repeal $16 billion of DSH cuts in FYs 2020–2022.
  • Bipartisan leaders of the Senate Committee on Finance updated their Prescription Drug Pricing Reduction Act of 2019 to include a repeal of $12 billion in DSH cuts in FYs 2020 and 2021.
  • Congress passed, and the president signed, a comprehensive spending package that delayed by an additional five months the scheduled $4 billion cut to Medicaid DSH in FY 2020. This was the third bipartisan vote last year to delay the scheduled cut as part of the broader budgetary process.

Read Our View – Essential Hospitals Rely on Medicaid DSH

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