CMS Proposes Reduced Hospital DSH Cuts

Cheryl Clark, for HealthLeaders Media , May 14, 2013

In its proposed rule, the agency outlined five areas that the law says must be taken into account in considering how much to cut DSH funding to states.

  1. Low DSH states receive smaller reductions.
  2. States with the lowest percentages of uninsured individuals receive larger reductions.
  3. States that do not target their DSH payments to hospitals with high volumes of Medicaid beneficiaries receive larger reductions.
  4. States that do not target their DSH payments on hospitals with high levels of uncompensated care receive larger reductions.
  5. States that have increased coverage under section 1115 demonstrations as of July 31, 2009, and adjusted their DSH allotments, will have these adjustments taken into account.

In a letter to Rep. Lewis supporting his legislation to delay all the cuts for two years, Pollack wrote that the healthcare reform law in 2010 was expected to provide "an additional 32 million Americans with healthcare coverage by 2019, and therefore Congress deemed it appropriate to reduce payments to the DSH programs under the assumption that fewer uninsured individuals would be accessing hospital care."

But last year, the Supreme Court determined "that the federal government could not force states to add additional beneficiaries to their Medicaid programs," a decision that "has negatively impacted projected health insurance expansion, with the Congressional budget Office recently estimating 27 million Americans will be covered under the ACA— a decline of 5 million insured individuals. In addition, there is uncertainty surrounding the level of coverage that will be obtained through the exchanges."

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