A June Health Affairs study found that planned reductions in Medicaid disproportionate share hospital (DSH) payments and ongoing inflation in health care costs will cause debilitating gaps in funding for California essential hospitals. The study analyzed 20 essential hospitals in California; these hospitals account for 98.5 percent of the state’s DSH payments. The study found that while the Affordable Care Act (ACA) will reduce the number of uninsured people in California, uncompensated care costs will increase due to increased Medicaid payment shortfalls and the rising cost of health care. Further, the authors found the current amount of DSH payments these hospitals receive accounts for only 54 percent of their reported uncompensated care costs and Medicaid shortfalls.
DSH payment cuts are scheduled to begin in fiscal year 2017. The authors project that while these cuts will have harsh consequences in California, the outlook for states that have not expanded their Medicaid Program will be worse. These states will not have the additional Medicaid revenue to offset the cuts in DSH funding.
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