Federal law requires that state Medicaid programs make Disproportional Share Hospital (DSH) payments to hospitals that serve a large number of Medicaid and uninsured individuals. Since the Affordable Care Act (ACA) would reduce the number of uninsured, the law mandated that DSH allotments be reduced.
The ACA reduced DSH payments beginning in the 2014 fiscal year — which starts on October 1 of 2013 — by mandating that federal DSH funding be reduced by amounts that increase each year through 2019. While the ACA provides some guidance as to how those reductions are to be allocated among the states, the details are left to the Secretary of Health and Human Service (HHS). In 2013, HHS issued rules explaining how they planned to reduce payments for fiscal year 2014 and fiscal year 2015.
Then in late 2013, a provision of the Bipartisan Budget Act of 2013 delayed the DSH cuts by two years so that they wouldn’t begin until fiscal year 2016. Since the legislation didn’t change the total amount of the cuts, the same reductions would be spread over a shorter period of time.
Then earlier this year, Section 221 of the Protecting Access to Medicare Act pushed the cuts to fiscal year 2017. HHS has not yet issued rules explaining how any of these recent changes will be implemented. As such, the timeline of reductions to DSH allotments and the amounts of those reductions are unknown.
More information about DSH and Medicaid Expansion can be found here.