Report to Congress on Medicaid Disproportionate Share Hospital Payments

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February 2016

The Protecting Access to Medicare Act of 2014 required MACPAC to produce annual reports on Medicaid disproportionate share hospital (DSH) payment, specifically to analyze how state allotments relate to three factors: (1) changes in the number of uninsured individuals, (2) amounts and sources of hospitals’ uncompensated care costs, and (3) the number of hospitals with high levels of uncompensated care that also provide access to essential community services for low-income, uninsured, and vulnerable populations.

MACPAC’s analysis finds little meaningful relationship between state DSH allotments—which are largely based on state spending from the early 1990s—and any of these factors. While coverage expansions related to the Patient Protection and Affordable Care Act (P.L. 111-148, as amended) are improving hospital finances generally, in this report the Commission notes the lack of complete and timely data on hospital uncompensated care makes it difficult to determine how hospitals that serve the highest share of low-income patients are being affected.

The report finds that DSH allotments and payments should be better targeted toward states and hospitals that serve a disproportionate share of Medicaid and low-income patients and that have higher levels of uncompensated care. The report also documents the need for greater transparency in how hospitals are being paid, which is critical to understanding states’ use of Medicaid funds and the extent to which these are consistent with federal requirements.

To fill these data gaps, the Commission recommends that the Secretary of the U.S. Department of Health and Human Services collect and report hospital-specific data on all types of Medicaid payments for all hospitals that receive them. In addition, the Secretary should collect and report data on the sources of non-federal share necessary to determine net Medicaid payment at the provider level.

Note: This report has been updated with the following change on page 26 referring to essential community services: “Among the 798 deemed DSH hospitals identified, 702 provided at least one of the included services, with 303 providing two of these services and 171 providing three or more of these services.” In addition, Table B-1 has been reformatted to reflect current and projected state DSH allotments, fiscal years 2016–2017.

Publication Type: Reports to Congress

Tags: Affordable Care Act, data, disproportionate share hospital (DSH) payment, financing, hospitals, payment, safety net providers, supplemental payments, uninsured