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1 1 (May 10, 2024)

handle is hein.crs/govepuu0001 and id is 1 raw text is: Congressional Research Service Informing th~ legislitive debate since 1914 Updated May 10, 2024 Medicaid Disproportionate Share Hospital (DSH) Reductions The Medicaid statute requires states to make disproportionate share hospital (DSH) payments to hospitals treating large numbers of low-income patients. This provision is intended to recognize the disadvantaged financial situation of those hospitals because low-income patients are more likely to be uninsured or Medicaid enrollees. Hospitals often do not receive payment for services rendered to uninsured patients, and Medicaid provider payment rates are generally lower than the rates paid by Medicare and private insurance. (See CRS Report R42865, Medicaid Disproportionate Share Hospital Payments.) Whereas most federal Medicaid funding is provided on an open-ended basis, federal Medicaid DSH funding is capped. Each state receives an annual DSH allotment, which is the maximum amount of federal funds that each state is permitted to claim for Medicaid DSH payments. In FY2023, federal DSH allotments totaled $16.0 billion. DSH Al otment Reduction Amounts The Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended) has reduced the number of uninsured individuals in the United States through the health insurance coverage provisions (including the ACA Medicaid expansion). Built on the premise that with fewer uninsured individuals there should be less need for Medicaid DSH payments, the ACA included a provision directing the Secretary of the Department of Health and Human Services (HHS) to make aggregate reductions in Medicaid DSH allotments equal to $500 million in FY2014, $600 million in FY2015, $600 million in FY2016, $1.8 billion in FY2017, $5.0 billion in FY2018, $5.6 billion in FY2019, and $4.0 billion in FY2020. Despite the assumption that decreasing the number of uninsured individuals would reduce the need for Medicaid DSH payments, the ACA was written so that, after the specific reductions for FY2014 through FY2020, DSH allotments would have returned to the amounts that states would have received without the enactment of the ACA. In other words, in FY2021, states' DSH allotments would have rebounded to their pre-ACA-reduced levels, with annual inflation adjustments for FY2014 to FY2021. The Medicaid DSH reductions have been amended by more than a dozen laws since the ACA. These amendments have delayed the implementation of the Medicaid DSH reductions and modified the reduction amounts. Most recently, the Medicaid DSH reductions were amended in the Consolidated Appropriations Act, 2024 (P.L. 118-42). Under current law, the Medicaid DSH reductions are to occur from FY2025 (specifically, the period beginning January 1, 2025, and ending September 30, 2025) through FY2027 (see Figure 1). The aggregate reductions to the Medicaid DSH allotments equal $8.0 billion for each of those years. Figure 1 shows estimates of aggregate DSH allotments for FY2012 through FY2029 before the ACA reductions, with the ACA reductions, and under current law. The ACA reductions that never went into effect totaled $18.1 billion, and under current law the DSH allotment reductions total $24.0 billion. Figure I. Total DSH Allotments from FY2012 to FY2029 Without the Reductions, with the ACA Reductions, and Under Current Law N-4 - -tf fLn 0 r 00 r)-4 N m t * n l r, 00 7 ~ ~ ~ 1 N- N1 `N N N N N N Source: CRS calculation using Consumer Price Index for All Urban Consumers estimates from Congressional Budget Office, The Long- Term Budget Outlook: 2024 to 2025, March 2024. Note: Medicaid DSH allotments were temporarily increased during the Coronavirus Disease 2019 (COVID-19) public health emergency period (i.e., FY2020 through the first fiscal quarter of FY2024). Under current law, the aggregate reductions relative to the Medicaid DSH allotments before reductions will be an estimated 53% reduction in FY2025 phasing down to an estimated 51% reduction in FY2027. In FY2028, DSH allotments will rebound to the pre-reduced levels, with annual inflation adjustments for FY2025 to FY2027. Statutory Requirements for Reductions to State DSH Allotments Although the aggregate DSH reduction amounts are specified in statute, the HHS Secretary is responsible for determining how to distribute the aggregate DSH reductions among the states using some broad statutory guidelines. The Secretary is required to impose larger percentage DSH reductions on states that (1) have the lowest percentage of uninsured individuals (determined by the Census Bureau's data, audited hospital cost reports, and Without Reductions $15 $9 $6 ACA Reductions Current $3 (not implemented) Law SQ $ Bil I I n $18

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