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Annual Analysis of Medicaid Disproportionate Share Hospital Allotments to States

Chapter 4 of the March 2023 report fulfills MACPAC’s annual, statutorily mandated obligation to report on Medicaid disproportionate share hospital (DSH) allotments to states for payments to hospitals that serve a high proportion of Medicaid beneficiaries and other low-income patients.

As in prior years, the Commission finds little meaningful relationship between state DSH allotments and the number of uninsured individuals, hospitals’ uncompensated care costs, and the number of hospitals with high levels of uncompensated care that also provide essential community services for low-income, uninsured populations.

The policy response through the COVID-19 public health emergency (PHE) helped lower the uninsured rate, improve hospital finances, and increase DSH allotments. However, the COVID-19 pandemic significantly impacted hospital finances, with hospitals reporting $41.9 billion in hospital charity care and bad debt costs in FY 2020. Chapter 4 also notes that the American Rescue Plan Act increased DSH allotments by $1.5 billion in FY 2023, but these will phase out by FY 2024 as the PHE comes to an end. MACPAC estimates that fiscal year 2024 DSH allotments will be reduced by 54 percent ($8 billion) on October 1, 2023, due to scheduled reductions. The Commission will consider recommendations on a countercyclical adjustment to DSH allotments for inclusion in the June 2023 report to Congress.

From: March 2023 Report to Congress on Medicaid and CHIP