The Centers for Medicare and Medicaid Services (CMS) released a proposed rule on May 13 to allocate cuts to Medicaid disproportionate share hospital (DSH) payments mandated by the Affordable Care Act (ACA). The proposed rule was published in the Federal Register on May 15.
Assuming that the ACA coverage expansion would result in significant decreases in uncompensated care for disproportionate share hospitals, Congress used DSH cuts to help offset the costs of the legislation.
This rule would only apply to the first two years of DSH cuts under the ACA, which requires a $500 million cut in federal DSH funding for FY2014 and $600 million in FY2015. The cuts balloon quickly after FY2016 to $1.8 billion in FY2017, $5 billion in FY2018, $5.6 billion in FY2019 and then $4 billion in FY2020. Subsequent legislation has “rebased” the DSH cuts for FY2021 and FY2022 at $4 billion.
The ACA required the methodology to:
Impose a smaller percentage reduction on low DSH States;
Impose larger percentage reductions on states that have the lowest percentages of uninsured individuals during the most recent year for which such data are available;
Impose larger percentage reductions on states that do not target their DSH payments on hospitals with high volumes of Medicaid inpatients;
Impose larger percentage reductions on states that do not target their DSH payments on hospitals with high levels of uncompensated care; and
Take into account the extent to which the DSH allotment for a state was included in the budget neutrality calculation for a coverage expansion approved under a Medicaid section 1115 waiver as of July 31, 2009.
As proposed, the rule would not take into account states’ decisions about whether to implement the ACA Medicaid expansion. Additional rulemaking will follow with a methodology for subsequent years. The proposed rule contains a table illustrating how the methodology may play out for each state.