Essential Hospitals Have Spoken: Stop DSH Cuts
In a letter last year to House and Senate leaders, more than 250 hospitals and health systems that care for low-income and marginalized patients and provide essential community services warned of the “far-reaching effects” of scheduled deep cuts to Medicaid DSH funding.
House, Senate Majorities Call for Action on DSH
In 2023, letters to House and Senate leaders signed by bipartisan majorities in each chamber called for immediate action to stop the disastrous $8 billion cut to Medicaid DSH on Oct. 1. Follow these links to read the letters:
Podcast: The Threat to Key Safety Net Support
Listen to our podcast series on priority policymaking issues for hospitals that provide safety net care. In this episode: the history of Medicaid DSH and the current threat to federal funding for this vital program.
A Cut to DSH Is a Cut to Medicaid
People and communities across the country rely on essential hospitals — and essential hospitals rely on Medicaid disproportionate share hospital (DSH) funding to keep their doors open. Medicaid DSH cuts put patients at risk.
What is DSH?
Medicaid DSH funding, which Congress established more than four decades ago, helps essential hospitals offset the high uncompensated costs of caring for the many uninsured and underinsured people who rely on these vital safety net providers. Cuts to DSH jeopardize health care access for low-income Americans, including working families and others who face financial hardships.
Source: America’s Essential Hospitals. Essential Data 2023: Our Hospitals, Our Patients. October 2023. essentialdata.info.
DSH and Essential Hospitals
Essential hospitals share a mission to care for all people, regardless of their financial means and insurance status. Three-quarters of essential hospitals’ patients are uninsured or have Medicaid or Medicare coverage. Marginalized and underrepresented populations and communities with systemic and structural barriers to care rely on essential hospitals for health and wellness.
Along with their safety net mission, essential hospitals provide specialized, lifesaving services, such as level I trauma and neonatal intensive care; train many physicians, nurses, and other health care professionals; coordinate care across large ambulatory networks; meet public health and crisis response needs; and advance health equity.
Although essential hospitals constitute about 5 percent of all U.S. hospitals, they provide nearly $9 billion in uncompensated care — nearly a quarter of all uncompensated care provided by acute-care hospitals nationwide. This leaves them with an average operating loss of −8.6 percent compared with −1.4 percent at other U.S. hospitals. So, essential hospitals rely on patchwork federal support to meet their safety net mission — especially Medicaid disproportionate share hospital (DSH) payments.
So, What’s the Problem?
Current law includes multiple years of dramatic reductions to Medicaid DSH funding, including a delayed $8 billion cut for fiscal year (FY) 2025 — two-thirds of all federal DSH support annually. Congress made those cuts 13 years ago with the expectation that coverage gains under the Affordable Care Act would reduce hospitals’ uncompensated costs and, in turn, the need for Medicaid DSH.
But coverage gains fell short of that expectation — by 7 million people compared with the law’s projection for 2019. Now, hospitals’ uncompensated costs are billions of dollars higher than expected, yet the DSH cuts remain — $24 billion from fiscal years 2025 to 2027.
These cuts are simply unsustainable. While no time is right for cuts of this magnitude, their timing now would be especially damaging, as essential hospitals continue to face high labor and supply costs and greater numbers of uninsured due to the end of expanded Medicaid coverage during the pandemic.
What’s at Risk?
Access to vital health care services in communities across the country, especially for people who face financial or social hardships. Also at risk: lifesaving services on which everyone depends, including trauma and burn care, neonatal intensive care, emergency preparedness, and disaster response.
Further, essential hospitals often are a community’s largest employer, and the average essential hospital drives more than $1.7 billion annually in expenditures in state economies.* Medicaid DSH cuts threaten more than access to care — they threaten jobs and economic prosperity.
* Source: America’s Essential Hospitals. Essential Data 2023: Our Hospitals, Our Patients. October 2023. essentialdata.info.
What Can Congress Do?
More than a dozen times — and with bipartisan votes — Congress has delayed or eliminated Medicaid DSH cuts. Lawmakers recognize the basic unfairness of the cuts, given lagging coverage gains, and the vital need for this safety net support.
America’s Essential Hospitals appreciates the strong precedent of bipartisan support for stopping the Medicaid DSH cuts. We urge Congress to act again, before Jan. 1, 2025, to protect this vital safety net support and eliminate the remaining $24 billion in DSH reductions.
Learn More
Please direct media inquiries or other questions to media@essentialhospitals.org.
401 Ninth St. NW Suite 900
Washington, DC 20004
202.585.0100
contact@essentialhospitals.org