DSH Cuts: A Threat to the Safety Net

Disproportionate share hospital (DSH) payments help cover the uncompensated costs of indigent care. The Affordable Care Act cut these payments, assuming coverage expansion would reduce uncompensated care. But coverage fell short of expectations, due in part to the U.S. Supreme Court decision to make Medicaid expansion optional. But the DSH cuts remain in law, even as uncompensated care is projected to grow dramatically:

Uncompensated Care and Medicaid DSH, 2020-2025

DSH allotments represent totals net of DSH cuts. Scale in billions of dollars. Hover cursor over bars to display values.

Notes: Uncompensated care data from the American Hospital Association; DSH allotments from America’s Essential Hospitals internal analysis.

Millions More Uninsured than Projected

The coverage challenges, partly a result of 19 states not expanding Medicaid, further underscore how the original justification for DSH cuts no longer applies:

Essential Hospitals Cannot Sustain DSH Cuts

Essential hospitals—those that care for millions of low-income, working Americans and others who face financial challenges—already operate with a margin less than half that of other hospitals. Without Medicaid DSH, these hospitals would suffer a 3.6 percent loss, on average. For them, Medicaid DSH is vital: