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Improving the Structure of Disproportionate Share Hospital Allotment Reductions

Chapter 1 of the March 2019 Report to Congress on Medicaid and CHIP addresses reductions to disproportionate share hospital (DSH) allotments; this funding enables states to make supplemental payments to offset the cost of uncompensated care. Under current law, these cuts will begin to take effect on October 1, 2019. The Commission is concerned that the magnitude of DSH cuts assumed under current law could affect the financial viability of some safety-net hospitals.  If Congress chooses to proceed with DSH cuts, MACPAC recommends that it takes specific actions to minimize the impact of the cuts on safety-net hospitals and better align the existing allotment methodology with the cost of uncompensated care. Its recommendations are to:

  • phase in DSH reductions more gradually over a longer period of time;
  • apply the reductions to unspent DSH funding first; and,
  • distribute the reductions in a way that gradually improves the relationship between DSH allotments and the number of non-elderly, low-income individuals in a state.
From: March 2019 Report to Congress on Medicaid and CHIP