GAO issues report on Medicaid DSH payments

Aug. 1, 2019
Medicaid spent over $177 billion on hospital care in fiscal year 2017 – a quarter of which were lump sum payments not tied to a specific patient's care.

Medicaid disproportionate share hospital payments to eligible hospitals covered 51 percent of their uncompensated care costs in 2014, the most recently available audited data, according to a new report released by the Government Accountability Office.

The payments are designed to help offset uncompensated care costs for hospitals serving a high proportion of Medicaid beneficiaries and uninsured low-income patients. The Affordable Care Act required a phased reduction in DSH allotments to states, reflecting the expectation that the number of uninsured would decline as states expanded Medicaid eligibility to certain low-income adults.

However, the report states that only 36 states and the District of Columbia have chosen to expand Medicaid eligibility under the law to date. The amount of DSH payments made to hospitals varied significantly. Among hospitals receiving DSH payments, nationally:

· Medicaid DSH payments covered 51 percent of the uncompensated care costs. In 19 states, DSH payments covered at least 50 percent of uncompensated care costs.

· DSH payments comprised about 14 percent of total Medicaid payments, yet wide variation existed. For example, DSH payments comprised about 97 percent of Medicaid payments to DSH hospitals in Maine and 0.7 percent of Medicaid payments to DSH hospitals in Tennessee.

After several delays by Congress, reports the American Hospital Association, the DSH reductions are scheduled to begin in fiscal year 2020. Legislation (H.R. 2328) approved this month by the House Energy and Commerce Committee to address surprise medical bills would eliminate the Medicaid DSH cuts in FY 2020 and 2021 and reduce the cuts to $4 billion for FY 2022. Leaders of the Senate Finance Committee requested the GAO report.