Medicaid Disproportionate Share Hospital
Payments
Alison Mitchell
Analyst in Health Care Financing
June 20December 2, 2013
Congressional Research Service
7-5700
www.crs.gov
R42865
CRS Report for Congress
Prepared for Members and Committees of Congress
Medicaid Disproportionate Share Hospital Payments
Summary
The Medicaid statute requires states to make disproportionate share hospital (DSH) payments to
hospitals treating large numbers of low-income patients. This provision is intended to recognize
the disadvantaged financial situation of those hospitals because low-income patients are more
likely to be uninsured or Medicaid enrollees. Hospitals often do not receive payment for services
rendered to uninsured patients, and Medicaid provider payment rates are generally lower than the
rates paid by Medicare and private insurance.
As with most Medicaid expenditures, the federal government reimburses states for a portion of
their Medicaid DSH expenditures based on each state’s federal medical assistance percentage
(FMAP). While most federal Medicaid funding is provided on an open-ended basis, federal
Medicaid DSH funding is capped. Each state receives an annual DSH allotment, which is the
maximum amount of federal matching funds that each state is permitted to claim for Medicaid
DSH payments. In FY2012, federal DSH allotments totaled $11.34 billion.
The health insurance coverage provisions of the Patient Protection and Affordable Care Act
(ACA, P.L. 111-148 as amended) are expected to reduce the number of uninsured individuals in
the United States, which means there should be less need for Medicaid DSH payments. As a
result, the ACA included a provision directing the Secretary of the Department of Health and
Human Services to make aggregate reductions in federal Medicaid DSH allotments for each year
from FY2014 to FY2020. The Middle Class Tax Relief and Job Creation Act of 2012 (P.L. 11296) and the American Taxpayer Relief Act of 2012 (H.R. 8) extended the DSH reductions to
FY2021 and FY2022. The Supreme Court’s decision regarding the ACA Medicaid expansion
does not impact these DSH reduction amounts, but states’ decisions about implementing the ACA
Medicaid expansion could impact the allocation of the DSH reductions across states starting in
FY2016. However, the proposedfinal rule for the Medicaid DSH reduction methodology for FY2014
and and
FY2015 does not take into account states’ decisions regarding the ACA Medicaid expansion.
While there are some federal requirements that states must follow in defining DSH hospitals and
calculating DSH payments, for the most part, states are provided significant flexibility. One way
the federal government restricts states’ Medicaid DSH payments is that the federal statute limits
the amount of DSH payments for Institutions for Mental Disease and other mental health
facilities.
Since Medicaid DSH allotments were implemented in FY1993, total Medicaid DSH expenditures
(i.e., including federal and state expenditures) have remained relatively stable. Over this same
period of time, total Medicaid DSH expenditures as a percentage of total Medicaid medical
assistance expenditures (i.e., including both federal and state expenditures but excluding
expenditures for administrative activities) dropped from 13% to 4%.
This report provides an overview of Medicaid DSH. It includes a description of the rules
delineating how state DSH allotments are calculated and the exceptions to the rules, how DSH
hospitals are defined, and how DSH payments are calculated. The DSH allotment section
includes information about how the ACA DSH reductions may be allocated among the states, and
the possible implications of the Supreme Court’s decision regarding the ACA Medicaid
expansion. The DSH expenditures section shows the trends in DSH spending and explains
variation in states’ DSH expenditures. Finally, the basic requirements for state DSH reports and
independently certified audits are also outlined.
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Medicaid Disproportionate Share Hospital Payments
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Medicaid Disproportionate Share Hospital Payments
Contents
Introduction...................................................................................................................................... 1
Background: Medicaid DSH ............................................................................................................ 2
States Slow to Implement DSH Programs ................................................................................. 3
Sharp Increase in DSH Expenditures ........................................................................................ 3
Limits on DSH Payments .......................................................................................................... 4
DSH Allotments ............................................................................................................................... 4
Exceptions for Certain States .................................................................................................... 8
Low DSH States .................................................................................................................. 8
Hawaii and Tennessee ......................................................................................................... 9
DSH Allotment Reductions ..................................................................................................... 10
Proposals to Amend the DSH Reductions ......................................................................... 12
Statutory Requirements for Reductions to State DSH Allotments .................................... 13
Proposed Methodology for Allocating DSH Reductions in FY2014 and FY2015 ........................... 14
DSH Reductions and the ACA Medicaid Expansion ........................................................ 18
DSH Payments ............................................................................................................................... 23
Defining DSH Hospitals .......................................................................................................... 23
Calculating DSH Payments ..................................................................................................... 24
The Definition of Uninsured ............................................................................................. 2425
Institutions for Mental Disease (IMD) DSH Limits ................................................................ 26
DSH Expenditures ......................................................................................................................... 26
State Variation.......................................................................................................................... 30
DSH as a Percentage of Total Medical Assistance Expenditures ...................................... 30
Hospital Versus IMD ......................................................................................................... 31
State Reporting and Auditing Requirements.................................................................................. 33
Conclusion ..................................................................................................................................... 34
Figures
Figure 1. Total DSH Allotments Before the Reductions, with the ACA Reductions, and
Under Current Law ..................................................................................................................... 12
Figure 2. Proposed Methodology for Dividing the FY2014 Annual Aggregate DSH
Reduction Reduction
Amount Among the Reduction Factors ...................................................................................... 15
Figure 3. Total Medicaid DSH Expenditures, FY1990-FY2012 ................................................... 27
Figure 4. Total DSH Expenditures as a Percentage of Total Medicaid Medical Assistance
Expenditures ............................................................................................................................... 28
Figure 5. States’ Share of Total Medicaid DSH Expenditures ....................................................... 29
Figure 6. Total State DSH Expenditures as a Percentage of Total Medicaid Medical
Assistance Expenditures ............................................................................................................. 30
Figure 7. Proportion of State DSH Expenditures Allocated to Hospitals and IMDs ..................... 32
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Tables
Table 1. Total DSH Expenditures and Total DSH Expenditures as a Percentage of Total
Medicaid Medical Assistance Expenditures ................................................................................. 3
Table 2. DSH Allotments for FY2010, FY2011, and FY2012FY2011, FY2012, and FY2013......................................................... 6
Table 3. Federal DSH Funding Available to Tennessee and Hawaii .............................................. 10
Table B-1. State Factors for DSH Reductions—Percentage of Uninsured Individuals and
Low DSH State Designation ....................................................................................................... 40
Table C-1. States’ Preliminary IMD DSH Limits .............................................................................................. 42
Table D-1. DSH Expenditures by Type and DSH Expenditures as a Percentage of Medical
Assistance Expenditures ............................................................................................................. 44
Appendixes
Appendix A. A Chronology of State DSH Allotments Calculations .............................................. 35
Appendix B. ACA DSH Reductions .............................................................................................. 39
Appendix C. IMD DSH Limits ...................................................................................................... 42
Appendix D. State-by-State DSH Expenditures ............................................................................ 44
Contacts
Author Contact Information........................................................................................................... 46
Congressional Research Service
Medicaid Disproportionate Share Hospital Payments
Introduction
Medicaid is a federal-state program providing medical assistance for low-income individuals.1
Historically, Medicaid eligibility has generally been limited to low-income children, pregnant
women, parents of dependent children, the elderly, and individuals with disabilities; however,
recent changes will soon add coverage for individuals under the age of 65 with income up to
133% of the federal poverty level (FPL).2
Participation in Medicaid is voluntary for states, though all states, the District of Columbia, and
territories3 choose to participate. In order to participate in Medicaid, the federal government
requires states to cover certain mandatory populations and benefits, but the federal government
also allows states to cover optional populations and services.4 Due to this flexibility, there is
substantial variation among the states in terms of factors such as Medicaid eligibility, covered
benefits, and provider payment rates.
Medicaid is jointly financed by the federal government and the states. States incur Medicaid costs
by making payments to service providers (e.g., for doctor visits) and performing administrative
activities (e.g., making eligibility determinations), and the federal government reimburses states
for a share of these costs.5 The federal government’s share of a state’s expenditures for most
Medicaid services is called the federal medical assistance percentage (FMAP).6 The FMAP varies
by state and is inversely related to each state’s per capita income. For FY2013FY2014, FMAP rates range
from 50% (1415 states) to 73% (Mississippi), and, on average, the federal contribution covers about
57% of the total cost of Medicaid in a typical year.
The Medicaid statute requires that states make disproportionate share hospital (DSH) payments to
hospitals treating large numbers of low-income patients.7 This provision is intended to recognize
the disadvantaged financial situation of such hospitals because low-income patients are more
1
For more information about the Medicaid program, see CRS Report RL33202, Medicaid: A Primer, by Elicia J. Herz.
The Patient Protection and Affordable Care Act (ACA, P.L. 111-148 as amended) establishes 133% of federal poverty
level (FPL) based on modified adjusted gross income (MAGI) as the new mandatory minimum Medicaid income
eligibility level. The law also specifies that an income disregard in the amount of 5% FPL will be deducted from an
individual’s income when determining Medicaid eligibility based on MAGI. Thus, the effective upper income
eligibility threshold for individuals in this new eligibility group will be 138% FPL. On November 21, 2011, President
Obama signed into law P.L. 112-56, which changes the definition of income to include non-taxable Social Security in
the definition of MAGI.
3
The territories are American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, Puerto Rico, and the
Virgin Islands.
4
On June 28, 2012, the United States Supreme Court issued its decision in National Federation of Independent
Business v. Sebelius, finding that the federal government cannot terminate current Medicaid program federal matching
funds if a state refuses to implement the Medicaid expansion required by ACA. If a state accepts the new ACA
Medicaid expansion funds, it must abide by the new expansion coverage rules, but, based on the Court’s opinion, it
appears that a state can refuse to participate in the expansion without losing any of its current federal Medicaid
matching funds.
5
For an overview of Medicaid financing issues, see CRS Report R42640, Medicaid Financing and Expenditures, by
Alison Mitchell.
6
For more information about the FMAP rate, see CRS Report RL32950R42941, Medicaid’s Federal Medical Assistance
Percentage (FMAP), FY2013FY2014, by Alison Mitchell and Evelyne P. Baumrucker.
7
The Medicare program also makes DSH payments. Medicaid and Medicare DSH hospital payments are similar in that
the major basis for designating hospitals to receive payments is the proportion of services provided to low-income
patients. However, Medicaid and Medicare have different criteria for identifying DSH hospitals, and the programs have
different calculations for determining DSH payment amounts. For FY2012, Medicare DSH payments are estimated to
(continued...)
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Medicaid Disproportionate Share Hospital Payments
the disadvantaged financial situation of such hospitals because low-income patients are more
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Medicaid Disproportionate Share Hospital Payments
likely to be uninsured or Medicaid enrollees. Hospitals often do not receive payment for services
rendered to uninsured patients, and Medicaid provider payment rates are generally lower than the
rates paid by Medicare and private insurance.
While most federal Medicaid funding is provided on an open-ended basis, federal Medicaid DSH
funding is capped. Each state receives an annual federal DSH allotment, which is the maximum
amount of federal matching funds that each state can claim for Medicaid DSH payments. In
FY2012, the federal DSH allotments to states totaled $11.34 billion.
This report provides an overview of Medicaid DSH, including how state DSH allotments are
calculated and the exceptions to the DSH allotments calculation; how DSH hospitals are defined
and how DSH payments to hospitals are calculated; trends in DSH spending; variation in states’
DSH expenditures; and requirements outlining the basic requirements for state DSH reports and
independently certified audits. The DSH allotment section includes information about how the
ACA DSH reductions will be allocated among the states, and the potential implications of the
Supreme Court’s decision in National Federation of Independent Business v. Sebelius.
Background: Medicaid DSH
Medicaid DSH payments were established in the Omnibus Budget Reconciliation Act of 1981
(OBRA 1981, P.L. 97-35) when the methodology for Medicaid payment rates to hospitals was
amended.8 Prior to OBRA 1981, state Medicaid programs were required to reimburse hospitals on
a reasonable cost basis (as defined under Medicare) unless the state had approval to use an
alternate payment method.9 This law deleted the reasonable cost methodology and transferred the
responsibility for determining Medicaid payment rates to the states.
A new provision required Medicaid hospital payment rates to take into account the situation of
hospitals that serve a disproportionate number of “low income patients with special needs.”10 This
requirement established the Medicaid DSH payments.
The inclusion of this Medicaid DSH provision in OBRA 1981 recognized that hospitals serving a
disproportionate share of low income patients are particularly dependent on Medicaid payments
because low income patients are mostly Medicaid enrollees and uninsured individuals.11
Hospitals often do not receive payment for services rendered to uninsured patients, and Medicaid
provider payment rates are generally lower than the rates paid by Medicare and private insurance.
(...continued)
be $10.8 billion. (Congressional Budget Office, Medicare – March 2012 Baseline, March 13, 2012.)
8
The DSH provision was included in a package of provisions referred to as the “Boren amendment” after its sponsor,
Senator David Boren from Oklahoma.
9
The Secretary of Health and Human Services could approve an alternate system only if the Secretary determined that
(1) a reasonable cost was paid (though the state could develop its own methods and standards for determining what was
reasonable) and (2) the reasonable cost did not exceed the amount which would be determined reasonable under
Medicare.
10
§1902(a)(13)(A)(iv) of the Social Security Act.
11
Conf. Rept. 97-208.
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Medicaid Disproportionate Share Hospital Payments
States Slow to Implement DSH Programs
While the requirement to make DSH payments was originally established in 1981, many states
did not make DSH payments throughout the 1980s. As a result, other federal laws were enacted
with provisions aimed at getting states to make DSH payments. For instance, a provision in the
Omnibus Budget Reconciliation Act of 1986 (P.L. 99-509) was aimed at supporting state
flexibility to make DSH payments. Also, the Omnibus Budget Reconciliation Act of 1987 (P.L.
100-203) required states to submit a Medicaid state plan amendment12 describing their DSH
policies and establishing certain minimum qualifying standards and payments.
Sharp Increase in DSH Expenditures
DSH payments quickly became a significant portion of Medicaid spending in the early 1990s.
DSH expenditures (including federal and state expenditures) grew from $1.0 billion in FY1990 to
$17.4 billion in FY1992. As a percent of total Medicaid medical assistance expenditures (i.e.,
including federal and state spending and excluding expenditures for administrative activities),
DSH expenditures grew from 1.3% of total Medicaid medical assistance expenditures in FY1990
to 15.0% in FY1992 (see Table 1).
Table 1. Total DSH Expenditures and Total DSH Expenditures as a Percentage of
Total Medicaid Medical Assistance Expenditures
FY1990 to FY1992
DSH Expenditures
(in billions)
Percent Increase
DSH Expenditures as a % of
Medical Assistance
Expenditures
FY1990
$1.0
NA
1.3%
FY1991
$4.7
370.0%
5.2%
FY1992
$17.4
270.2%
15.0%
Source: Payments estimated by the Urban Institute.
Notes: Total DSH expenditures include both federal and state spending on DSH payments. Total Medicaid
medical assistance expenditures include federal and state spending and exclude Medicaid spending on
administrative activities.
DSH = Disproportionate Share Hospital.
The significant increase in DSH expenditures was not attributed to the laws enacted by Congress.
Instead, the growth in Medicaid expenditures coincided with states’ increased use of provider
taxes and donations to help finance the state share of Medicaid expenditures.13 DSH payments
12
A Medicaid State Plan is a contract between a state and the federal government describing how that state administers
its Medicaid program, and a state is required to submit a state plan amendment when the state intends to change its
Medicaid program.
13
In the mid-1980s, states began using provider taxes along with provider donations to help finance Medicaid.
Essentially, Medicaid providers would donate funds or agree to be taxed, and the revenue from these taxes and
donations would be used to finance a portion of the state’s share of Medicaid expenditures. Some states were
borrowing funds from Medicaid providers in order to draw down federal funds and increase Medicaid payment rates to
the same providers that had paid taxes or donated funds. The providers were often fully reimbursed for the cost of their
(continued...)
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Medicaid Disproportionate Share Hospital Payments
were a popular mechanism for returning provider taxes or donations to hospitals. Medicaid
payments for regular inpatient rates were subject to federal upper payment limits, but DSH
payments were uncapped and did not need to be tied to specific Medicaid enrollees or services.
As a result, states could increase DSH payments by any amount, tax away the state share of the
increased DSH payments through provider taxes, and thus draw down unlimited federal funds.
Limits on DSH Payments
This dramatic growth in DSH expenditures again prompted congressional action. The Medicaid
Voluntary Contribution and Provider-Specific Tax Amendments of 1991 (P.L. 102-234)
established ceilings on federal Medicaid DSH funding for each state.14 Since FY1993, each state
has had its own DSH limit, which is referred to as a “DSH allotment.”
DSH Allotments
While most federal Medicaid funding is provided on an open-ended basis, certain types of federal
Medicaid funding, such as federal DSH funding, are capped. Each state15 receives an annual DSH
allotment, which is the maximum amount of federal matching funds a state is permitted to claim
for Medicaid DSH payments.16
The original state DSH allotments provided in FY1993 were based on each state’s FY1992 DSH
payments. In FY1992, some states provided relatively more DSH payments to hospitals, and, as a
result, these states locked in relatively higher Medicaid DSH allotments. Other states made
relatively fewer DSH payments, and these states locked in relatively lower DSH allotments.
This disparity still remains to some extent in current DSH allotments because DSH allotments are
not distributed according to a formula based on the number of DSH hospitals in a state or the
amount of hospital services these hospitals provide to low-income patients. However, over time,
the disparity in DSH allotments was reduced by providing larger annual increases to DSH
allotments for states that initially made fewer DSH payments and limiting the growth of DSH
allotments for states that initially provided relatively more DSH payments.
The methodology for calculating states’ annual DSH allotments has changed a number of times
over the years. A history of the DSH allotment calculations is provided in Appendix A.
(...continued)
tax payment or donation. For more information about Medicaid provider taxes and donations, see CRS Report
RS22843, Medicaid Provider Taxes, by Alison Mitchell.
14
Also, the Medicaid Voluntary Contribution and Provider-Specific Tax Amendments (P.L. 102-234) restricted the use
of provider donations in financing Medicaid to extremely limited situations and limited states’ ability to draw down
federal Medicaid matching funds with provider tax revenue.
15
State is defined as the 50 states and the District of Columbia. DSH allotments are not provided for the five territories
(i.e., America Samoa, Commonwealth of the Northern Mariana Islands, Guam, Puerto Rico, and the Virgin Islands).
(§1923(f)(9) of the Social Security Act).
16
Each state’s regular FMAP rate is used to determine the federal share of DSH payments.
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Medicaid Disproportionate Share Hospital Payments
Currently, states’ Medicaid DSH allotments are based on each state’s prior year DSH allotment.
Specifically, a state’s DSH allotment is the higher of (1) a state’s FY2004 DSH allotment17 or (2)
the prior year’s DSH allotment increased by the percentage change in the consumer price index
for all urban consumers (CPI-U) for the prior fiscal year. In FY2012, Louisiana was the only state
that continued to receive its FY2004 DSH allotment.
In addition, eachEach state’s allotment can be no more than the greater of the prior year’s allotment or
12% of its
total Medicaid medical assistance expenditures (i.e., including federal and state
spending and
excluding expenditures for administrative activities) during the fiscal year.18 This
rule is referred
to as the “12% limit.”19 This means the federal share of DSH expenditures cannot
be more than
12% of each state’s total Medicaid medical assistance expenditures.
In addition,
federal regulations to the state-specific 12% limit, there is a national DSH target. Federal regulations
specify that aggregate DSH payments, including federal and state
expenditures, expenditures for all states,
should not be more than 12% of the total amount of Medicaid medical assistance
expenditures for
all 50 states and the District of Columbia.20 This national limit is not an absolute
cap but a
target.21 The national DSH payment limit is different from the 12% limit on state DSH
allotments allotments
because the 12% national payment limit restricts both federal and state spending while
the 12%
limit for allotments caps only federal spending.
Due to the “state-specific 12% limit” for state DSH allotments, the Centers for Medicare &
Medicaid Services
(CMS) must publish preliminary DSH allotments before the start of the fiscal
year based on
estimated Medicaid expenditures. Then, after the fiscal year has ended, CMS uses actual
actual expenditure data to calculate final DSH allotments.
CMS calculates annual allotments and publishes them in the Federal Register. The most recent
Federal Register notice22 included final DSH allotments for FY2010 and FY2011 and preliminary
DSH FY2012 and preliminary DSH
allotments for FY2012FY2013. The federal DSH allotments for these yearsFY2011 through FY2013 are shown in
Table 2.
17
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA, P.L. 108-173) addressed the
drop in DSH allotments for many states from FY2002 to FY2003 by providing a 16% increase in DSH allotments for
states in FY2004. If a state’s FY2004 DSH allotment is higher than the DSH allotment calculated under the pre-MMA
calculation, then the state has received that higher DSH allotment amount since FY2004.
18
§1923(f)(3)(B) of the Social Security Act.
19
When DSH allotments were first implemented, a state with DSH expenditures greater than 12% of its total Medicaid
medical assistance expenditures were classified as “high-DSH” states, and “high-DSH” states did not receive annual
increases to their DSH allotment.
20
42 C.F.R. §447.297.
21
This means if a state receives a federal DSH allotment equal to 12% of its total Medicaid medical assistance
expenditures and the state uses all of its federal DSH allotment, then with the state matching funds, the state would
provide DSH payments in excess of 12% of its total Medicaid medical assistance expenditures. As a result, the national
DSH target could be surpassed. However, in FY2011, DSH payments were well below the national DSH target with
total DSH payments (i.e., including federal and state expenditures) amounting to 4.2% of total Medicaid medical
assistance expenditures (i.e., including federal and state expenditures but excluding administrative services).
22
Department of Health and Human Services’ Centers for Medicare & Medicaid Services, “Medicaid Program:
Disproportionate Share Hospital Allotments and
Institutions for Mental Diseases Disproportionate Share Hospital
Limits for FYs 2010, 2011FY2012, and Preliminary FY 2012 FY2013
Disproportionate Share Hospital Allotments and Limits,” 77
78 Federal Register 4330145217, July 24, 201226, 2013.
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Table 2. DSH Allotments for FY2010, FY2011, and FY2012
($ in millions)
FY2010a
State
Regular
DSH
Allotment
Alabama
ARRA
Temporary
DSH
Increase
Final DSH
Allotment
FY2011
FY2012
Final DSH
Allotment
Preliminary
DSH
Allotment
$302.4
$15.3
$317.7
$307.5
$314.9
Alaskab
20.0
1.0
21.0
20.4
20.9
Arizona
99.6
5.0
104.6
101.3
103.7
Arkansasb
42.4
2.1
44.6
43.1
44.2
California
1,078.0
54.6
1,132.6
1,096.3
1,122.7
Colorado
91.0
4.6
95.6
92.5
94.7
196.7
10.0
206.6
200.0
204.8
8.9
0.5
9.4
9.1
9.3
60.2
3.0
63.3
61.3
62.7
Florida
196.7
10.0
206.6
200.0
204.8
Georgia
264.3
13.4
277.7
268.8
275.2
Hawaiic
10.0
0.0
10.0
10.0
10.0
Idahob
16.2
0.8
17.0
16.4
16.8
Illinois
211.4
10.7
222.1
215.0
220.2
Indiana
210.2
10.6
220.8
213.8
218.9
Iowab
38.7
2.0
40.7
39.4
40.3
Kansas
40.6
2.1
42.6
41.3
42.2
Kentucky
142.6
7.2
149.8
145.0
148.5
Louisiana
732.0
37.1
769.0
732.0
732.0
Maine
103.3
5.2
108.5
105.0
107.5
75.0
3.8
78.8
76.3
78.1
Massachusetts
299.9
15.2
315.1
305.0
312.3
Michigan
260.6
13.2
273.8
265.0
271.4
Minnesotab
73.4
3.7
77.2
74.7
76.5
Mississippi
150.0
7.6
157.6
152.5
156.2
Missouri
465.9
23.6
489.5
473.8
485.2
Montanab
11.2
0.6
11.7
11.4
11.6
Nebraskab
27.8
1.4
29.2
28.3
29.0
Nevada
45.5
2.3
47.8
46.3
47.4
New Hampshire
157.4
8.0
165.4
160.1
164.0
New Jersey
633.0
32.0
665.1
643.8
659.3
20.0
1.0
21.0
20.4
20.9
Connecticut
Delawareb
District of Columbia
Maryland
New Mexicob
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FY2011
FY2012
Final DSH
Allotment
Final DSH
Allotment
Preliminary
DSH
Allotment
FY2010a
State
Regular
DSH
Allotment
New York
ARRA
Temporary
DSH
Increase
1,579.5
80.0
1,659.5
1,606.4
1,644.9
North Carolina
290.1
14.7
304.8
295.0
302.1
North Dakotab
9.4
0.5
9.9
9.6
9.8
Ohio
399.5
20.2
419.7
406.3
416.0
Oklahomab
35.6
1.8
37.4
36.2
37.1
Oregon
44.5
2.3
46.8
45.3
46.4
Pennsylvania
551.9
27.9
579.9
561.3
574.8
Rhode Island
63.9
3.2
67.2
65.0
66.6
South Carolina
322.1
16.3
338.4
327.5
335.4
South Dakotab
10.9
0.5
11.4
11.0
11.3
Tennesseec
305.5
0.0
305.5
305.5
123.6
Texas
940.3
47.6
987.9
956.3
979.3
Utahb
19.3
1.0
20.3
19.6
20.1
Vermont
22.1
1.1
23.2
22.5
23.0
Virginia
86.2
4.4
90.5
87.6
89.7
181.9
9.2
191.1
185.0
189.5
West Virginia
66.4
3.4
69.7
67.5
69.1
Wisconsinb
93.0
4.7
97.7
94.5
96.8
Wyomingb
0.2
0.0
0.2
0.2
0.2
$11,107.0
$546.3
11,653.3
$11,278.0
$11,341.6FY2011, FY2012, and FY2013
($ in millions)
State
Alabama
FY2011
FY2012
FY2013
Final DSH Allotment
Final DSH Allotment
Preliminary DSH
Allotment
$307.5
$315.5
$323.1
Alaskaa
20.4
20.9
21.4
Arizona
101.3
103.9
106.4
Arkansasa
43.1
44.3
45.3
California
1,096.3
1,124.8
1,151.8
Colorado
92.5
94.9
97.2
200.0
205.2
210.1
9.1
9.3
9.5
61.3
62.8
64.4
Florida
200.0
205.2
210.1
Georgia
268.8
275.8
282.4
Hawaiib
10.0
10.0
10.2
Idahoa
16.4
16.9
17.3
Illinois
215.0
220.6
225.9
Indiana
Connecticut
Delawarea
District of Columbia
213.8
219.3
224.6
Iowaa
39.4
40.4
41.4
Kansas
41.3
42.3
43.3
Kentucky
145.0
148.8
152.4
Louisiana
732.0
732.0
732.0
Maine
105.0
107.7
110.3
76.3
78.2
80.1
Massachusetts
305.0
313.0
320.5
Michigan
265.0
271.9
278.4
Minnesotaa
74.7
76.6
78.5
Mississippi
152.5
156.5
160.2
Missouri
473.8
486.1
497.8
Montanaa
11.4
11.6
11.9
Nebraskaa
28.3
29.0
29.7
Nevada
46.3
47.5
48.6
New Hampshire
160.1
164.3
168.2
New Jersey
643.8
660.5
676.4
20.4
20.9
21.4
1,606.4
1,648.1
1,687.7
Maryland
New Mexicoa
New York
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State
FY2011
FY2012
FY2013
Final DSH Allotment
Final DSH Allotment
Preliminary DSH
Allotment
North Carolina
295.0
302.7
310.0
North Dakotaa
9.6
9.8
10.0
Ohio
406.3
416.8
426.9
Oklahomaa
36.2
37.2
38.0
Oregon
45.3
46.4
47.6
Pennsylvania
561.3
575.9
589.7
Rhode Island
65.0
66.7
68.3
South Carolina
327.5
336.0
344.1
South Dakotaa
11.0
11.3
11.6
Tennesseec
305.5
123.6
53.1
Texas
956.3
981.2
1,004.7
Utaha
19.6
20.1
20.6
Vermont
22.5
23.1
23.6
Virginia
87.6
89.9
92.1
185.0
189.8
194.4
West Virginia
67.5
69.3
70.9
Wisconsina
94.5
97.0
99.3
Wyominga
0.2
0.2
0.2
$11,278.0
$11,362.1
$11,543.8
Washington
Total
Source: Department of Health and Human Services, “Medicaid Program: Disproportionate Share Hospital
Allotments and Institutions for Mental Diseases Disproportionate Share Hospital Limits for FYs 2010, 2011, and
Preliminary FY 2012FY2012 Disproportionate Share Hospital Allotments and Limits,” 77 Federal Register 43301, July 24,
2012.
Notes: DSH allotments are different from DSH payments. Allotments reflect the maximum amount of federal
DSH funding available to states, and DSH payments are the amounts paid to hospitals.
FY2010 was the last year the ARRA temporary DSH increase was available to states.
ARRA = American Recovery and Reinvestment Act.
a.
States’ “Final DSH Allotment” for FY2010 is the combination of the “Regular DSH Allotment” column and
the “ARRA Temporary DSH Increase” column.
b; Department of Health and Human Services, “Medicaid Program: Disproportionate Share Hospital
Allotments and Institutions for Mental Diseases Disproportionate Share Hospital Limits for FY2012, and
Preliminary FY2013 Disproportionate Share Hospital Allotments and Limits,” 78 Federal Register 45217, July 26,
2013.
Notes: DSH allotments are different from DSH payments. Allotments reflect the maximum amount of federal
DSH funding available to states, and DSH payments are the amounts paid to hospitals.
a.
These states are low DSH states. In the past, low DSH states received higher annual percentage increases
to their DSH allotments than the non-low DSH states. Currently, low DSH and other states receive the
same annual percentage increases to their DSH allotments.
cb.
Hawaii and Tennessee have special statutory arrangements that specify the DSH allotments for each state.has a special statutory arrangement that specifies the DSH allotment for the state. Beginning in
FY2013, Hawaii’s DSH allotment is determined the same way the DSH allotments are determined for low
DSH states.
c.
Tennessee has a special statutory arrangement that specifies the DSH allotment for the state. The statute
limits Tennessee’s Medicaid DSH payments to $91.6 million in FY2011, $70.1 million in FY2012, and $53.1
million in FY2013.
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Exceptions for Certain States
While most states’ DSH allotments are determined as described above, the DSH allotments for
some states are determined by an alternative method. In the past, low DSH states received higher
annual percentage increases to their DSH allotments, but currently low DSH states receive the
same annual percentage increases to DSH allotments as other states. Also, Hawaii and Tennessee
have special statutory arrangements for the determination of their respective DSH allotments.
Low DSH States
Special rules for low DSH states were initially established by the Medicare, Medicaid, and
SCHIP Benefits Improvement and Protection Act of 2000 (BIPA, incorporated into the
Consolidated Appropriations Act of 2001, P.L. 106-554).23 Subsequently, the Medicare
Prescription Drug, Improvement, and Modernization Act of 2003 (MMA, P.L. 108-173) amended
the definition of low DSH state, and this definition continues to apply today.
Under the MMA definition, a low DSH state is defined as a state with FY2000 DSH expenditures
greater than 0% but less that 3% of its total Medicaid medical assistance expenditures (i.e.,
including federal and state expenditures and excluding expenditures for administrative activities)
for FY2000. States determined to be low DSH states in FY2004 continue to be low DSH states
regardless of their DSH expenditures in years after FY2000.
States designated as low DSH states were provided greater annual increases to their DSH
allotments in order to remove some of the inequities from the initial FY1993 state DSH
allotments, which were based on states’ DSH expenditures in FY1992. However, increasing DSH
allotments does not necessarily mean states will increase their DSH payments. The increased
DSH allotments provide states with access to additional federal DSH funding if the states choose
to use it.
Under the MMA definition, a low DSH state is defined as a state with FY2000 DSH expenditures
greater than 0% but less that 3% of its total Medicaid medical assistance expenditures (i.e.,
including federal and state expenditures and excluding expenditures for administrative activities)
for FY2000. States determined to be low DSH states in FY2004 continue to be low DSH states
regardless of their DSH expenditures in years after FY2000.
Sixteen states qualified as low DSH states under the MMA definition, and they continue to be
defined as low DSH states. These states are Alaska, Arkansas, Delaware, Idaho, Iowa, Minnesota,
Montana, Nebraska, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Utah,
Wisconsin, and Wyoming.
Each year, from FY2004 through FY2008, low DSH states received a 16% increase to their DSH
allotments to increase their DSH allotments relative to other states.24
For FY2009 and subsequent
years, low DSH states receive DSH allotments equal to the prior
year’s allotment increased by the
percent change in CPI-U for the previous fiscal year, which is
the same adjustment that non-low
DSH states receive.
23
BIPA defined extremely low DSH states as those for which FY1999 total DSH payments (federal and state shares)
were greater than zero but less than 1% of the state’s total Medicaid medical assistance expenditures (i.e., the federal
and state share of Medicaid expenditures excluding administrative expenditures). (§1923(f)(5)(A) of the Social Security
Act.)
24
§1923(f)(5)(B) of the Social Security Act.
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Hawaii and Tennessee
Tennessee and Hawaii operate their state Medicaid programs under Section 1115 research and
demonstration waivers,25 which allow the Secretary of Health and Human Services (HHS) to
waive various provisions of Medicaid law. Both states received waivers from making Medicaid
DSH payments (among other things), and these states did not receive DSH allotments from
FY1998 to FY2006. However, since FY2007, these two states received DSH allotments by
special statutory authority provided through multiple laws.26 Table 3 shows the federal DSH
funding available to Hawaii and Tennessee from FY2007 to FY2014.
Hawaii
Hawaii’s DSH allotment was set at $10 million for each of FY2007 through FY2011. Under the
Patient Protection and Affordable Care Act (ACA, P.L. 111-148 as amended), Hawaii’s FY2012
DSH allotment was also set at $10.0 million, but the allotment was split into two periods. For the
first quarter of FY2012 (i.e., October 1, 2011, to December 31, 2011), Hawaii’s DSH allotment
was $2.5 million. Then, for the remaining three quarters of FY2012, Hawaii’s DSH allotment was
$7.5 million.
For FY2013 and subsequent years, Hawaii’s annual DSH allotment will increase in the same
manner applicable to low DSH states. Currently, all states, including low DSH states, receive
DSH allotments equal to the prior year’s allotment increased by the percent change in CPI-U for
the previous fiscal year.
Tennessee
StatuteThe federal statute specifies that Tennessee’s DSH allotment for each year from FY2007 to
FY2011 is the
greater of $280.0 million or the federal share of the DSH payments reflected in
TennCare27 for the
demonstration year ending in 2006. In accordance with this provision,
Tennessee’s DSH
allotment was $305.4 million (i.e., the federal share of the DSH payments
reflected in TennCare
for the demonstration year ending in 2006) from FY2007 to FY2011. The
statute further limits the
amount of federal funds available to Tennessee for DSH payments to
30% of Tennessee’s DSH
allotment. Under this limit, the federal DSH funding available to
Tennessee for each year from
FY2007 to FY2011 was $91.6 million (i.e., 30% of $305.4 million).
For the first quarter of FY2012 (i.e., October 1, 2011, through December 31, 2011), Tennessee’s
DSH allotment was $76.4 million28 and subject to the 30% limit. For the last three fiscal quarters
25
§1115 of the Social Security Act gives the Secretary of Health and Human Services authority to approve
experimental, pilot, or demonstration projects that promote the objectives of the Medicaid and CHIP programs.
26
These laws include the Tax Relief and Health Care Act of 2006 (P.L. 109-432), the Medicare, Medicaid, and SCHIP
Extension Act of 2007 (P.L. 110-173), the Medicare Improvements for Patients and Providers Act of 2008 (P.L. 110275), the Children’s Health Insurance Program Reauthorization Act of 2009 (P.L. 111-3), and the Patient Protection
and Affordable Care Act (P.L. 111-148 as amended).
27
TennCare is the name of Tennessee’s Medicaid program, which operates under a §1115 waiver.
28
This amount is one-fourth of $305,451,928, which was the DSH allotment for Tennessee for each year from FY2007
to FY2011.
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of FY2012, Tennessee received a DSH allotment of $47.2 million that was not subject to the 30%
limit. In total, Tennessee had access to $70.1 million29 in federal DSH funding in FY2012.
In FY2013, Tennessee will havehad a DSH allotment of $53.1 million that is not subject to the 30%
limit.
After FY2013, the statute does not provide a federal DSH allotmentsallotment to Tennessee.
Table 3. Federal DSH Funding Available to Tennessee and Hawaii
FY2007 to FY2014
Fiscal Year
Hawaii
Tennessee
FY2007
$10,000,000
$91,635,578
FY2008
$10,000,000
$91,635,578
FY2009
$10,000,000
$91,635,578
FY2010
$10,000,000
$91,635,578
FY2011
$10,000,000
$91,635,578
FY2012
$10,000,000
$70,108,895
FY2013
=$10,000,000 * (% Change in CPI-U for FY2012)$10,240,000a
$53,100,000
FY2014
=FY2013 Allotment * (% Change in CPI-U for FY2013)
$0
Source: Section 1923(f)(6) of the Social Security Act; Centers for Medicare & Medicaid Services, “Medicaid
Program; Final FY 2009FY2009 and Preliminary FY 2011FY2011 Disproportionate Share Hospital Allotments, and Final FY 2009FY2009
and Preliminary FY 2011FY2011 Institutions for Mental Diseases Disproportionate Share Hospital Limits,” 76 Federal
Register 148, January 3, 2011; Centers for Medicare & Medicaid Services, “Medicaid Program; Disproportionate
Share Hospital Allotments and Institutions for Mental Diseases Disproportionate Share Hospital Limits for FYs
2010, 2011, and Preliminary FY 2012FY2012 Disproportionate Share Hospital Allotments and Limits,” 77 Federal Register
43301, July 24, 2012; Department of Health and Human Services, “Medicaid Program: Disproportionate Share
Hospital Allotments and Institutions for Mental Diseases Disproportionate Share Hospital Limits for FY2012, and
Preliminary FY2013 Disproportionate Share Hospital Allotments and Limits,” 78 Federal Register 45217, July 26,
2013.
Notes: This chart does not provide DSH allotments for Hawaii and Tennessee but the federal DSH funding
available to Hawaii and Tennessee. For Hawaii, the DSH allotment and the federal DSH funding available is the
same. However, Tennessee’s allotment for FY2007 to FY2011 is $305,451,928, but the federal DSH funding
available to Tennessee is limited to 30% of the DSH allotment ($305,451,928 * 0.30 = $91,635,578). Tennessee’s
DSH funding for FY2012 is the combination of $22,908,895 (30% of $76,362,982) for the first fiscal quarter and
$47,200,000 for the last three fiscal quarters.
CPI-U = Consumer Price Index for all Urban consumers.
a.
This is the preliminary allotment for Hawaii.
DSH Allotment Reductions
The ACA is expected to reduce the number of uninsured individuals in the United States starting
in 2014 through the health insurance coverage provisions (including the ACA Medicaid
expansion as impacted by the Supreme Court’s ruling). Built on the premise that with fewer
uninsured individuals there should be less need for Medicaid DSH payments, the ACA included a
provision directing the Secretary of the Department of Health and Human Services (HHS) to
make aggregate reductions in Medicaid DSH allotments equal to $500 million in FY2014, $600
29
$70,108,895 = $22,908,895 (i.e., 30% of $76,362,982) + $47,200,000
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million in FY2015, $600 million in FY2016, $1.8 billion in FY2017, $5.0 billion in FY2018, $5.6
billion in FY2019, and $4.0 billion in FY2020.30 31
29
30
$70,108,895 = $22,908,895 (i.e., 30% of $76,362,982) + $47,200,000
§1923(f)(7) of the Social Security Act.
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Despite the assumption that reducing the uninsured would reduce the need for Medicaid DSH
payments, the ACA was written so that, after the specific reductions for FY2014 through FY2020,
DSH allotments would have returned to the amounts states would have received without the
enactment of ACA. In other words, in FY2021, states’ DSH allotments would have rebounded to
their pre-ACA reduced level with the annual inflation adjustments for FY2014 to FY2021.
However, the Middle Class Tax Relief and Job Creation Act of 2012 (P.L. 112-96) extended the
FY2020 DSH reduction for an additional year. Specifically, for FY2021, states’ DSH allotments
will be their FY2020 DSH allotment (as impacted by the aggregate $4.0 billion ACA reduction)
increased by the percentage change in CPI-U for FY2020.32 Under the Middle Class Tax Relief
and Job Creation Act of 2012, in FY2022, states’ DSH allotments were to rebound to their preACA reduced levels with the annual inflation adjustments for FY2014 to FY2022.
However, the American Taxpayer Relief Act of 2012 (ATRA, P.L. 112-240) extended the FY2020
DSH reduction for a second year. Specifically, ATRA bases the FY2022 DSH allotments on the
FY2021 DSH allotments increased by CPI-U. Under current law, in FY2023, states’ DSH
allotments will rebound to their pre-ACA reduced levels with the annual inflation adjustments for
FY2014 to FY2023.
Figure 1 shows the estimate of aggregate DSH allotments for FY2012 through FY2024 prior to
ACA, under ACA, and under current law (i.e., under ACA, the Middle Class Tax Relief and Job
Creation Act of 2012, and ATRA). Under current law, the aggregate DSH reductions will be
nominal from FY2014 to FY2016. Then, the aggregate reductions will phase up to an estimated
43% reduction in FY2019, and in FY2020 and FY2021, the aggregate DSH reductions will phase
down to roughly a 30% reduction. In FY2023, DSH allotments will rebound to the pre-ACA
reduced levels.
(...continued)
3130
§1923(f)(7) of the Social Security Act.
The United States Supreme Court decision in National Federation of Independent Business (NFIB) v. Sebelius
(issued June 28, 2012) did not impact this provision of ACA. Only the provision expanding Medicaid eligibility to all
nonelderly individuals was impacted by the Supreme Court decision.
32
§1923(f)(8) of the Social Security Act.
31
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Figure 1.Total DSH Allotments Before the Reductions, with the ACA Reductions,
and Under Current Law
($ in billions)
$16.0
$14.0
$12.0
$10.0
$8.0
$6.0
$4.0
$2.0
$0.0
FY2012
FY2014
FY2016
Before Reductions
FY2018
FY2020FY2016
FY2018
ACA Reductions
FY2020
FY2022
FY2024
Current LawReductions Added After ACA
Source: CRS calculation based on preliminary FY2012 final FY2012 and preliminary FY2013 DSH allotments.
Notes: The CPI-U factor used to inflate the DSH allotments is based on the factors built into the Congressional
Budget Office’s “The Budget and Economic Outlook: Fiscal Years 2012 to 2022” from January 20122013 to 2023” from February 2013.
DSH allotments are different from DSH expenditures. Allotments reflect the maximum amount of federal DSH
funding available to states, and DSH expenditures are the amounts paid to hospitals.
Proposals to Amend the DSH Reductions
Recently, theThe President’s FY2014 budget and, a bill introduced in the House of Representatives
, and a bill
introduced in the Senate have proposed amending the ACA Medicaid DSH allotment reductions.
The President’s Budget
The President’s FY2014 budget includes legislative proposals that would affect the ACA DSH
reductions.33 First, the President’s budget proposes to “rebase” the Medicaid DSH allotments for
FY2023 and subsequent years by calculating the Medicaid DSH allotments for these years based
on the ACA reduced levels. Specifically, the FY2023 Medicaid DSH allotments would be each
state’s FY2022 allotment increased by the percentage change in CPI-U, and the allotments for
33
For more information about the President’s FY2014 budget for the Centers for Medicare & Medicaid Services, see
CRS Report R43073, Centers for Medicare & Medicaid Services: President’s FY2014 Budget, coordinated by Alison
Mitchell.
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state’s FY2022 allotment increased by the percentage change in CPI-U, and the allotments for
subsequent years would be the previous year’s allotment increased by the percentage change in
CPI-U.
The second legislative proposal in the President’s budget would delay the Medicaid DSH
reductions for one year (i.e., the Medicaid DSH reductions would begin in FY2015 instead of
FY2014). To keep the proposal budget neutral, the $500 million reduction currently slated for
FY2014 would be reallocated over FY2016 and FY2017.
The DSH Reduction Relief Act of 2013House Bill
The DSH Reduction Relief Act of 2013 (H.R. 1920) was introduced by Representative John
Lewis on May 9, 2013. One provision in this bill would eliminate the first two years of ACA
Medicaid DSH reductions. If this bill were adopted, the Medicaid DSH reductions would begin in
FY2016 with $600 million in aggregate reductions.34
The Senate Bill
The DSH Reduction Relief Act of 2013 (S. 1555) was introduced by Senator Roger Wicker on
September 26, 2013. This bill proposes to eliminate the first two years of the ACA Medicaid
DSH reductions, and the bill offsets the cost by extending the FY2020 ACA Medicaid DSH
reductions for a third year to FY2023.
Statutory Requirements for Reductions to State DSH Allotments
While the aggregate DSH reduction amounts are specified in statute, the Secretary of HHS is
responsible for determining how to distribute the aggregate DSH reductions among the states
using some broad statutory guidelines. The Secretary of HHS is required to impose larger
percentage DSH reductions on states that
•
have the lowest percentage of uninsured individuals (determined by the Census
Bureau’s data, audited hospital cost reports, and other information likely to yield
accurate data) during the most recent fiscal year with available data (see Table
B-1 for states’ percentage of uninsured) or
•
do not target their DSH payments to hospitals with high volumes of Medicaid
patients and high levels of uncompensated care (excluding bad debt).
The statute also requires the Secretary of HHS to impose smaller percentage reductions on low
DSH states (i.e., states with total Medicaid DSH payments for FY2000 between 0% and 3% of
total Medicaid medical assistance expenditures). In Appendix B, Table B-1 includes the low
DSH state designations.
The last specification provided in statute requires the Secretary of HHS to take into account the
extent to which the DSH allotment for a state was included in the budget neutrality calculation for
a coverage expansion approved under a Section 1115 waiver as of July 31, 2009.
34
The DSH Reduction Relief Act of 2013 would also provide Tennessee with a Medicaid DSH allotment for FY2014
and FY2015 because under current law, Tennessee is not provided a Medicaid DSH allotment after FY2013.
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Although the statute provides the Secretary of HHS with flexibility regarding how to allocate the
DSH reductions among the states, in general, states with the lowest percentage of uninsured
individuals can be expected to receive relatively larger percentage DSH reductions. In addition,
states that do not target their DSH payments to hospitals with the most Medicaid patients and
highest uncompensated care can be expected to receive relatively larger percentage DSH
reductions. Also, low DSH states should receive relatively smaller percentage DSH reductions.
As a result, a non-low DSH state with a low percent of uninsured individuals that does not target
34
The DSH Reduction Relief Act of 2013 would also provide Tennessee with a Medicaid DSH allotment for FY2014
and FY2015 because under current law, Tennessee is not provided a Medicaid DSH allotment after FY2013.
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its DSH payments can be expected to receive a relatively larger percentage reduction, and a low
DSH state with a high percent of uninsured individuals that targets its DSH payments should
receive a relatively smaller percentage DSH reduction.
The magnitude of the Medicaid DSH reductions (especially in the later years) is such that most (if
not all) states are expected to have DSH allotment reductions. However, states might be able to
take action to lessen the magnitude of the Medicaid DSH reductions for their state. States might
be able to impact the criteria related to how they target their DSH payments and the percent of
uninsured individuals. However, states do not have the ability to impact the last two criteria
concerning low-DSH states and Section 1115 waiver budget neutrality calculations.
On May 15September 18, 2013, CMS released a proposedfinal rule regarding the methodology for allocating the
DSH reductions for FY2014 and FY2015.35 CMS will issue separate rulemaking for the
distribution of DSH allotment reductions for FY2016 through FY2020 because CMS does not
have enough information regarding the impacts of states’ decisions about implementing the ACA
Medicaid expansion. As a result, the data used to allocate the DSH reductions for FY2014 and
FY2015 will not reflect states’ decisions regarding the ACA Medicaid expansion, although CMS
stated that data might be available reflecting states’ decisions regarding the ACA Medicaid
expansion in time to be factored into the formula for the DSH reductions beginning in FY2016.
Proposed Methodology for Allocating DSH Reductions in FY2014 and FY2015
CMS’s proposedThe methodology for allocating the ACA DSH reductions for FY2014 and FY2015
begins by
splitting the aggregate DSH reduction amount for each year into two separate amounts
(see
Figure 2): one DSH reduction amount for low DSH states and another reduction amount for
non-low nonlow DSH states. Then, for each group of states, the DSH reduction amount will be distributed
by by
giving equal weight to each of the following three factors:
•
the “uninsured percentage factor,”
•
the “high volume of Medicaid inpatient factor,” and
•
the “high level of uncompensated care factor.”
In other words, one-third of each group’s DSH reductions will be allocated according to the
uninsured percentage factor, and two-thirds of the DSH reductions will be allocated according to
how states target their DSH funds through the “high volume of Medicaid inpatient factor” and the
“high level of uncompensated care factor.”
35
Centers for Medicare & Medicaid Services, “Medicaid Program; State Disproportionate Share Hospital Allotment
Reductions,” 78 Federal Register 57293, September 18, 2013.
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For states with Section 1115 waivers for coverage expansionsexpansions36 that were approved before July
31,
2009, the amount of the DSH allotment (if any) that is included in the budget neutrality
calculation will be excluded from the calculations for the “high volume of Medicaid inpatient
factor” and the “high level of uncompensated care factor.”
35
Centers for Medicare & Medicaid Services, “Medicaid Program; State Disproportionate Share Hospital Allotment
Reductions,” 78 Federal Register 28551, May 15, 2013.
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Figure 2. Proposed Methodology for Dividing the FY2014 Annual Aggregate DSH
Reduction Reduction
Amount Among the Reduction Factors
Source: CRS using the illustrative DSH reduction factor weighting allocation from the proposed rule, and the
changes in the final rule do not impact the distribution of the DSH reduction as shown in this figure. (Centers for
. (Centers
for Medicare & Medicaid Services, “Medicaid Program; State Disproportionate Share Hospital Allotment
Reductions,” 78 Federal Register 28551, May 15, 2013.)
Note: Totals may not add due to rounding.
36
Under an approved section 1115 waiver, states may have limited authority to make DSH payments under section
1923 of the Social Security Act because all or a portion of their DSH allotment is included in the budget neutrality
calculation for an expansion of Medicaid eligibility under an approved section 1115 waiver or to fund uncompensated
care pools and/or safety net care pools.
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Splitting the Reduction Among Low DSH and Non-Low DSH States
States will be splitSplitting the Reduction Among Low DSH and Non-Low DSH States
CMS proposes splitting states into two groups (low DSH36DSH37 and non-low DSH), and and proportionally
allocating the aggregate DSH
reductions to each of the two state groups will be proportionally allocated based on a “low DSH
adjustment factor” that is calculated using states’ DSH allotments as a percentage of total
Medicaid medical assistance expenditures (including federal and state expenditures but excluding
expenditures for administrative activities). As shown in Figure 2, for an aggregate Medicaid DSH
reduction in the amount of $500 million, using the proposed “low DSH adjustment factor” to
allocate the
DSH reduction among the two state groups would result in a $6.2 million aggregate
36
There are sixteen low DSH states: Alaska, Arkansas, Delaware, Idaho, Iowa, Minnesota, Montana, Nebraska, New
Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Utah, Wisconsin, and Wyoming.
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reduction for
the low DSH states and a $493.8 million aggregate reduction for the non-low DSH
states.38
Uninsured Percentage Factor
In order to allocate larger percentage reductions to states with the lowest percentages of uninsured
individuals, CMS proposes using the “uninsured percentage factor” that will be calculated based
on the percentage of
uninsured in each state. As specified by statute, the data for the uninsured
population will come
from the Census Bureau, specifically the most recent “1-year estimates”
data from the American
Community Survey (ACS). Currently, the most recent ACS data are from
2011 2012. The Census
Bureau usually releases the “1-year estimates” data in September, which means
the 20122013 ACS
data should be available in September 20132014.
High Volume of Medicaid Inpatient Factor
CMS proposes using theThe “high volume of Medicaid inpatients factor” towill impose larger percentage
reductions on
states that do not target their DSH payments to hospitals with the highest volumes
of Medicaid
inpatients.
The proposed rule defines hospitalsHospitals with the highest volumes of Medicaid inpatients are defined as hospitals
that have
Medicaid utilization rates at least one standard deviation above the mean Medicaid
utilization rate
for hospitals receiving Medicaid payments in the state.3739 By statute, states are
required to provide
Medicaid DSH payments to these hospitals, but the statute does not specify
the level of Medicaid
DSH payments for these hospitals.
The proposed “high volume of Medicaid inpatients factor” wouldwill be calculated for each state
using the
following: the preliminary unreduced DSH allotment, DSH hospital payment amounts,
the the
Medicaid inpatient utilization rate for each hospital receiving a DSH payment, and the value
of of
one standard deviation above the mean Medicaid inpatient utilization rate for hospitals
receiving receiving
Medicaid payments (a new reporting requirement).
The proposed rule states that by basing the “high volume of Medicaid inpatients factor” reduction
on amounts that states do not target to hospitals with high volumes of Medicaid inpatients, this
proposed methodology incentivizes states to target DSH payments to such hospitals. However,
two of the data points used to calculate the “high volume of Medicaid inpatients factor” (DSH
hospital payment amounts and the Medicaid inpatient utilization rate for hospitals receiving DSH
payments) will come from states’ annual DSH reports (see “State Reporting and Auditing
Requirements” for information about the annual DSH reports). Currently, the most recent state
annual DSH reports are from 2008. So, assuming the same lag time in reporting, if a state were to
change how it targets its DSH funds today, the change would not be reflected in its DSH
reductions until either FY2018 or FY2019.
37
These hospitals must also meet the minimum qualifying requirements for hospitals to receive Medicaid DSH
payments. As specified by Section 1923(d) of the Social Security Act, in order to receive Medicaid DSH payments a
hospital must retain at least two obstetricians with staff privileges willing to serve Medicaid patients (with exceptions
for children’s hospitals, hospitals that do not offer non-emergency obstetric services, and certain rural hospitals). In
addition, a hospital cannot be identified as a DSH hospital if its Medicaid utilization rate is below 1%.
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37
There are sixteen low DSH states: Alaska, Arkansas, Delaware, Idaho, Iowa, Minnesota, Montana, Nebraska, New
Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Utah, Wisconsin, and Wyoming.
38
This is from the illustrative example provided in the proposed regulation. (Centers for Medicare & Medicaid
Services, “Medicaid Program; State Disproportionate Share Hospital Allotment Reductions,” 78 Federal Register
28551, May 15, 2013.)
39
These hospitals must also meet the minimum qualifying requirements for hospitals to receive Medicaid DSH
payments. As specified by Section 1923(d) of the Social Security Act, in order to receive Medicaid DSH payments a
hospital must retain at least two obstetricians with staff privileges willing to serve Medicaid patients (with exceptions
for children’s hospitals, hospitals that do not offer non-emergency obstetric services, and certain rural hospitals). In
addition, a hospital cannot be identified as a DSH hospital if its Medicaid utilization rate is below 1%.
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By basing the “high volume of Medicaid inpatients factor” reduction on amounts that states do
not target to hospitals with high volumes of Medicaid inpatients, this methodology incentivizes
states to target DSH payments to such hospitals. However, two of the data points used to calculate
the “high volume of Medicaid inpatients factor” (DSH hospital payment amounts and the
Medicaid inpatient utilization rate for hospitals receiving DSH payments) will come from states’
annual DSH reports (see “State Reporting and Auditing Requirements” for information about the
annual DSH reports). Currently, the most recent state annual DSH reports are from 2008 because
the reports are due the last day of the federal fiscal year ending three years from the end of the
state plan year. So, assuming the same lag time in reporting, if a state were to change how it
targets its DSH funds today, the change would not be reflected in its DSH reductions until either
FY2018 or FY2019.
High Level of Uncompensated Care Factor
The “high level of uncompensated care factor” will be used to impose larger percentage DSH
reductions on states that do not target Medicaid DSH payments to hospitals with high levels of
uncompensated care.
Uncompensated care costs will be defined according to the existing statutory definition used to
determine the hospital-specific limit for Medicaid DSH payments (discussed in “Calculating DSH
Payments”). According to this definition, uncompensated care costs are the difference between
costs incurred by the hospital for inpatient and outpatient services provided to Medicaid enrollees
and individuals with no health insurance (or other third-party coverage) for services provided
minus all revenues received for these services.
Most of the data points used to calculate the “high volume of uncompensated care factor” (e.g.,
DSH hospital payment amounts, hospitals’ uncompensated care cost amounts, hospitals’
Medicaid cost amounts, and hospitals’ uninsured cost amounts) wouldwill come from states’ annual
DSH reports. As discussed above, there is a significant lag in the availability of the annual DSH
reports, with the most recent reports being from 2008.
The proposed rule pointspointed out a potential unintended consequence with the calculation of the
“high
volume of uncompensated care factor.” Hospitals’ uncompensated care costs are calculated by
by dividing a hospital’s uncompensated care costs by the sum of its total Medicaid and uninsured
costs. Since this calculation does not take into account hospitals’ total costs, it would beis possible
for a
hospital to be deemed a non-high uncompensated care level hospital even though the
hospital hospital
provides a high percentage of services to Medicaid and uninsured individuals and has
high high
uncompensated care costs. The proposed calculation does not use hospitals’ total costs
because the current
DSH reporting requirements do not collect information about hospitals’ total
costs.
Section 1115 Budget Neutrality Factor
According to statute, the Secretary of HHS is required to take into account the extent to which the
DSH allotment for a state was included in the budget neutrality calculation for a coverage
expansion approved under a Section 1115 waiver.38 In order for any or all of a state’s DSH
40 In order for any or all of a state’s DSH
40
Section 1115 of the Social Security Act gives the Secretary of HHS authority to approve experimental, pilot, or
demonstration projects that promote the objectives of the Medicaid and CHIP programs. In the early 1980s, HHS
adopted a policy that required states to document that their proposed demonstrations would be budget neutral to the
(continued...)
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allotment to be excluded from certain portions of DSH allotment reduction calculations, a state
needs to have had its DSH allotment in the budget neutrality calculation for a coverage expansion
approved under a Section 1115 waiver as of July 31, 2009, and the DSH allotment must continue
to be included in the budget neutrality calculation for the coverage expansion for each fiscal year.
If a state includes the DSH allotment in the budget neutrality calculation for a Section 1115
waiver that is not a coverage expansion (e.g., uncompensated care or safety net pools) or if the
Section 1115 waiver was not approved by July 31, 2009, then the Section 1115 budget neutrality
38
Section 1115 of the Social Security Act gives the Secretary of HHS authority to approve experimental, pilot, or
demonstration projects that promote the objectives of the Medicaid and CHIP programs. In the early 1980s, HHS
adopted a policy that required states to document that their proposed demonstrations would be budget neutral to the
federal government, that is, the federal government will spend no more with the demonstrations than without them.
Each demonstration operates under a negotiated budget neutrality agreement that places limits on federal Medicaid
spending over the life of the demonstration. Budget neutrality is a requirement in place through HHS policy but is not a
statutory requirement for Medicaid demonstrations.
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factor does not apply and the state’s total DSH allotment is included in the DSH reduction
calculations.
According to the illustrative example provided in the proposed rule, three states (Maine,
Massachusetts, and Wisconsin) and the District of Columbia would qualify for the “Section 1115
budget neutrality factor.”
For these qualifying states, the proposed rule would exclude the amount of DSH allotment
included in the budget neutrality
calculation for a coverage expansion will be excluded from the calculations for
the “high volume
of Medicaid inpatients factor” and the “high volume of uncompensated care
factor.” Since DSH
payment data are not available for DSH allotment amounts included in the
budget neutrality
calculations for Section 1115 waiver for non-coverage expansions, the proposed
methodology would assign an average reduction
percentage for the “high volume of Medicaid
inpatients factor” and the “high volume of
uncompensated care factor” will be assigned for the amount of a state’s
DSH allotment included
in the budget neutrality calculation for a non-coverage expansion waiver.
Potential State-by-State Impact
CMS provided an illustrative example in the proposed rule for how the proposed methodology would
impact each
state’s FY2014 DSH allotments. According to this example, the allotment reductions
for low
DSH states would range from 0.49% (Delaware) to 2.29% (Hawaii), and the reductions for nonlow
for non-low DSH states would range from 1.86% (Nevada) to 7.14% (Arkansas).3941
DSH Reductions and the ACA Medicaid Expansion
The proposed rule with the methodology for allocating the DSH reductions for FY2014 and
FY2015 does not take into
account states’ decisions regarding the ACA Medicaid expansion.
However, when CMS proposes
the methodology for allocating the DSH for FY2016 and
subsequent years, the allocation of the
reductions may take into account states’ decisions
regarding the ACA Medicaid expansion.
ACA Medicaid Expansion and the Supreme Court
Beginning in 2014 (or sooner at state option), the ACA expands Medicaid to include a new
mandatory eligibility group: all adults under age 65 with income up to 133% of the federal
poverty level (FPL) (effectively 138% FPL with the modified adjusted gross income40 5% FPL
income disregard).41 Originally, it was assumed that all states would implement the ACA
Medicaid expansion in 2014 as required by statute because implementing the ACA Medicaid
expansion was required in order for states to receive any federal Medicaid funding. However, on
39
These values are only for the purposes of illustrating the proposed DSH allotment reduction methodology.
The modified adjusted gross income (MAGI) is a new income definition used for determining Medicaid income
eligibility for certain individuals beginning in 2014. For more information about MAGI, see CRS Report R41997,
Definition of Income for Certain Medicaid Provisions and Premium Credits in ACA, coordinated by Janemarie Mulvey.
41
Historically, Medicaid eligibility was generally limited to low-income children, pregnant women, parents of
dependent children, the elderly, and people with disabilities. For more information about the ACA changes to
Medicaid, see CRS Report R41210, Medicaid and the State Children’s Health Insurance Program (CHIP) Provisions
in ACA: Summary and Timeline, by Evelyne P. Baumrucker et al.
40
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June 28, 2012, the United States Supreme Court issued its decision in National Federation of
Independent Business (NFIB) v. Sebelius42 finding that the federal government cannot terminate
the federal Medicaid funding a state receives for its current Medicaid program if a state refuses to
implement the ACA Medicaid expansion. If a state accepts the new ACA Medicaid expansion
funds, it must abide by the new expansion coverage rules. However, based on the Court’s opinion,
it appears that a state can refuse to participate in the ACA Medicaid expansion without losing any
of its current federal Medicaid matching funds.43 regarding the ACA Medicaid expansion.
(...continued)
federal government, that is, the federal government will spend no more with the demonstrations than without them.
Each demonstration operates under a negotiated budget neutrality agreement that places limits on federal Medicaid
spending over the life of the demonstration. Budget neutrality is a requirement in place through HHS policy but is not a
statutory requirement for Medicaid demonstrations.
41
These values are only for the purposes of illustrating the proposed DSH allotment reduction methodology. Centers
for Medicare & Medicaid Services, “Medicaid Program; State Disproportionate Share Hospital Allotment Reductions,”
78 Federal Register 28551, May 15, 2013.
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ACA Medicaid Expansion and the Supreme Court
Beginning in 2014 (or sooner at state option), the ACA expands Medicaid to include a new
mandatory eligibility group: all adults under age 65 with income up to 133% of FPL (effectively
138% FPL with the modified adjusted gross income42 5% FPL income disregard).43 Originally, it
was assumed that all states would implement the ACA Medicaid expansion in 2014 as required by
statute because implementing the ACA Medicaid expansion was required in order for states to
receive any federal Medicaid funding. However, on June 28, 2012, the United States Supreme
Court issued its decision in National Federation of Independent Business (NFIB) v. Sebelius44
finding that the federal government cannot terminate the federal Medicaid funding a state
receives for its current Medicaid program if a state refuses to implement the ACA Medicaid
expansion. If a state accepts the new ACA Medicaid expansion funds, it must abide by the new
expansion coverage rules. However, based on the Court’s opinion, it appears that a state can
refuse to participate in the ACA Medicaid expansion without losing any of its current federal
Medicaid matching funds.45
The Supreme Court decision only impacts the ACA Medicaid expansion, so the provision
reducing Medicaid DSH allotments remains unchanged. This means the Supreme Court ruling
does not affect the ACA Medicaid DSH reduction amounts or the statutory criteria the Secretary
must use to determine a methodology for distributing the DSH reductions among states. However,
the fact that some states may not implement the ACA Medicaid expansion could impact how the
DSH reductions are distributed among the states starting in FY2016. Specifically, states’
decisions whether or not to implement the ACA Medicaid expansion could impact the percentage
of uninsured individuals in their state, which is one of the criteria the Secretary must use to
determine how to distribute the Medicaid DSH reductions among states.
ACA Expected to Reduce the Percent of Uninsured in All States
The percentage of uninsured individuals in all states is expected to decrease through a
combination of ACA health insurance coverage provisions that increase access to health insurance
(most of which will be effective starting in 2014). The ACA increases access to health insurance
by establishing the health insurance exchanges, which are structured marketplaces for the sale and
purchase of health insurance. Also, certain individuals will be eligible for federal premium tax
credits and cost-sharing subsidies to help them afford health insurance.4446 The other major health
insurance coverage provision included in the ACA is the Medicaid expansion.
After the Supreme Court decision, the health insurance exchanges and the premium cost-sharing
subsidies are still expected to reduce the percent of uninsured individuals in all states. However,
the ACA Medicaid expansion is expected to reduce the number of uninsured individuals by less
than previously estimated because some states are expected to decide not to implement the ACA
Medicaid expansion.
Even if a state does not implement the ACA Medicaid expansion, some of the individuals that
would have been covered by the Medicaid expansion may still gain health insurance coverage as
a part of the ACA health insurance coverage provisions. The ACA provides premium tax credits
and cost-sharing subsidies to individuals with household income between 100% and 400% of FPL
that do not have access to minimum essential coverage.45 As a result, most uninsured individuals
42
132 S. Ct. 2566 (2012).
42
The modified adjusted gross income (MAGI) is an income definition used for determining Medicaid income
eligibility for certain individuals beginning in 2014. For more information about MAGI, see CRS Report R41997,
Definition of Income for Certain Medicaid Provisions and Premium Credits in ACA, coordinated by Christine Scott.
43
Historically, Medicaid eligibility was generally limited to low-income children, pregnant women, parents of
dependent children, the elderly, and people with disabilities. For more information about the ACA changes to
Medicaid, see CRS Report R41210, Medicaid and the State Children’s Health Insurance Program (CHIP) Provisions
in ACA: Summary and Timeline, by Evelyne P. Baumrucker et al.
44
132 S. Ct. 2566 (2012).
45
For a discussion of the Supreme Court’s decision on the Medicaid expansion, see CRS Report R42367, Medicaid and
Federal Grant Conditions After NFIB v. Sebelius: Constitutional Issues and Analysis, by Kenneth R. Thomas.
4446
For more information about the American Health Benefit Exchanges and the federal subsidies, see CRS Report
R42663, Health Insurance Exchanges Under the Patient Protection and Affordable Care Act (ACA), by Bernadette
Fernandez and Annie L. Mach.
45
The definition of minimum essential coverage is broad. It includes Medicare Part A, Medicaid, the State Children’s
Health Insurance Program (CHIP), Tricare, the TRICARE for Life program, the veteran’s health care program, the
Peace Corps program, a government plan (local, state, federal) including the Federal Employees Health Benefits
Program (FEHBP) and any plan established by an Indian tribal government, any plan offered in the individual, small
(continued...)
43
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After the Supreme Court decision, the health insurance exchanges and the premium cost-sharing
subsidies are still expected to reduce the percent of uninsured individuals in all states. However,
the ACA Medicaid expansion is expected to reduce the number of uninsured individuals by less
than previously estimated because some states are expected to decide not to implement the ACA
Medicaid expansion.
Even if a state does not implement the ACA Medicaid expansion, some of the individuals that
would have been covered by the Medicaid expansion may still gain health insurance coverage as
a part of the ACA health insurance coverage provisions. The ACA provides premium tax credits
and cost-sharing subsidies to individuals with household income between 100% and 400% of FPL
who do not have access to minimum essential coverage.47 As a result, most uninsured individuals
with incomes between 100% and 133% (effectively 138%) of FPL living in states that decide not
to implement the ACA Medicaid expansion may become eligible for these premium tax credits
and cost-sharing subsidies to purchase health insurance through the health insurance exchanges.4648
Regardless of whether a state decides to implement the ACA Medicaid expansion or not, all states
could experience an increase in Medicaid enrollment, due to the “woodwork” effect. This is the
name for uninsured individuals who are currently eligible but not enrolled in Medicaid enrolling
in Medicaid due to increased media attention and outreach efforts. The impact of the woodwork
effect depends on the percentage of a state’s population that is currently eligible and not enrolled
in Medicaid. Estimates find that nationally 7.3 million to 9.0 million uninsured children and
adults are currently eligible but not enrolled in Medicaid.4749
How States’ Decisions About the ACA Medicaid Expansion Could Impact Their
DSH Reductions Starting in FY2016
Each state’s percentage of uninsured individuals will be impacted by the state’s decision about the
ACA Medicaid expansion. However, states’ percentages of uninsured individuals will be
impacted by factors other than the ACA Medicaid expansion. For instance, states’ percentages of
uninsured individuals will also be affected by the activity in the health insurance exchanges and
changes in employer-sponsored insurance coverage.
States’ decisions about whether or not to implement the ACA Medicaid expansion will impact
states’ percentages of uninsured individuals, which could impact states’ Medicaid DSH
reductions. However, the magnitude of states’ Medicaid DSH reductions depends on a number of
factors. As mentioned previously, the statute provides the Secretary of HHS with four criteria to
use in determining the allocation of the Medicaid DSH reductions, and states’ percentage of
uninsured individuals is just one of those criteria. The extent to which the change in each state’s
percent of uninsured individuals impacts each state’s Medicaid DSH reductions depends on the
methodology the Secretary of HHS uses to distribute the DSH reductions among states starting in
FY2016.
How states’ decisions regarding the ACA Medicaid expansion impact the allocation of the DSH
reductions among states depends on which states decide not to implement the expansion and
which states decide to implement the expansion. Specifically, state characteristics that could
impact the allocation of Medicaid DSH reductions are states’ current percentages of uninsured
individuals and states’ current Medicaid eligibility levels.
(...continued)47
The definition of minimum essential coverage is broad. It includes Medicare Part A, Medicaid, the State Children’s
Health Insurance Program (CHIP), Tricare, the TRICARE for Life program, the veteran’s health care program, the
Peace Corps program, a government plan (local, state, federal) including the Federal Employees Health Benefits
Program (FEHBP) and any plan established by an Indian tribal government, any plan offered in the individual, small
group or large group market, a grandfathered health plan, and any other health benefits coverage, such as a state health
benefits risk pool, as recognized by the Secretary of HHS in coordination with the Treasury Secretary.
4648
Uninsured individuals with household income below 100% of FPL and living in a state that does not implement the
ACA Medicaid expansion are not eligible for the premium tax credits or cost-sharing subsidies.
4749
Benevieve M. Kenney, Lisa Dubay, Stephen Zuckerman, and Michael Huntress, Opting Out of the Medicaid
Expansion under the ACA: How Many Uninsured Adults Would not Be Eligible for Medicaid?, The Urban Institute
Health Policy Center, July 5, 2012; Benjamin D. Sommers and Arnold M. Epstein, “Perspective: Why States Are So
Miffed about Medicaid - Economics, Politics, and the “Woodwork Effect”,” The New England Journal of Medicine,
vol. 365, no. 2, pp. 100-102.
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use in determining the allocation of the Medicaid DSH reductions, and states’ percentage of
uninsured individuals is just one of those criteria. The extent to which the change in each state’s
percent of uninsured individuals impacts each state’s Medicaid DSH reductions depends on the
methodology the Secretary of HHS uses to distribute the DSH reductions among states starting in
FY2016.
How states’ decisions regarding the ACA Medicaid expansion impact the allocation of the DSH
reductions among states depends on which states decide not to implement the expansion and
which states decide to implement the expansion. Specifically, state characteristics that could
impact the allocation of Medicaid DSH reductions are states’ current percentages of uninsured
individuals and states’ current Medicaid eligibility levels.
If a state that currently has one of the lowest percentages of uninsured individuals chooses not to
implement the ACA Medicaid expansion, then the percent of uninsured individuals for that state
could reduce less than other states that domight decrease by less than for another state that does implement the expansion. Since the
measure of percent
of uninsured individuals is a relative ranking of states, the state’s decision not
to implement the
ACA Medicaid expansion could cause the state’s percent of uninsured to go
from one of the
lowest percentages to an average percentage. States with the lowest percentage of uninsured
uninsured individuals are supposed to get the largest percentage DSH reductions, which means
this state
could reduce the magnitude of its DSH allotment reduction by not implementing the ACA
ACA Medicaid expansion.
Under the Medicaid program, some eligibility groups are mandatory, meaning that all states must
cover them; other eligibility groups are optional. As a result of state differences in optional
coverage, Medicaid eligibility varies significantly from state to state. If a state with relatively
lower levels of Medicaid eligibility chooses to implement the ACA Medicaid expansion, then that
state would be expected to lower its percentage of uninsured individuals more than other states
implementing the ACA Medicaid expansion. As a result, this state could increase the magnitude
of its DSH allotment reduction by implementing the ACA Medicaid expansion.
Since the Supreme Court ruling, some states have stated their intention to implement the ACA
Medicaid expansion, other states have asserted that they will not implement the expansion, and
mostsome states remain uncommitted. As of October 24, 2013, 26 states have indicated their intention
to implement the ACA Medicaid expansion starting January 1, 2014.50 However, it should be
However, it should be noted that states are not locked into their
intentions regarding the implementation of the ACA
Medicaid expansion. CMS has stated that
states face no deadline for deciding when and if they
will implement the ACA Medicaid
expansion. Also, according to CMS, states can choose to
implement the expansion and later drop
Medicaid eligibility back to their pre-ACA Medicaid
expansion levels.4851
In general, states indicating they will not implement the ACA Medicaid expansion (e.g., Georgia,
Louisiana, Mississippi, South Carolina, and Texas)49 currently have relatively high percentages of
52 currently have relatively high percentages of
50
Centers for Medicare & Medicaid Services, State Medicaid and CHIP Income Eligibility Standards Effective January
1, 2014, October 24, 2013.
51
Centers for Medicare & Medicaid Services, Frequently Asked Questions on Exchanges, Market Reforms and
Medicaid, December 10, 2012.
52
Centers for Medicare & Medicaid Services, State Medicaid and CHIP Income Eligibility Standards Effective January
1, 2014, October 24, 2013.
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uninsured individuals and relatively lower Medicaid eligibility levels for nondisabled adults
under age 65.5053 Depending on how the Secretary chooses to distribute the Medicaid DSH
reductions for FY2016 and subsequent years, by not implementing the ACA Medicaid expansion,
these states might be able to reduce the magnitude of their DSH reductions.
While there are some exceptions, most of the states indicating they will implement the ACA
Medicaid expansion (e.g., California, Connecticut, Delaware, Hawaii, Illinois, Maryland,
Massachusetts, Minnesota, Rhode Island, Vermont, and Washington)5154 tend to have relatively
lower percentages of uninsured individuals and relatively higher Medicaid eligibility levels for
48
Centers for Medicare & Medicaid Services, Frequently Asked Questions on Exchanges, Market Reforms and
Medicaid, December 10, 2012.
49
State Refor(u)m, Tracking Medicaid Expansion Decisions: A Closer Look at Legislative Activity, Updated May 9,
2013; The Advisory Board Company, Where Each State Stands on ACA’s Medicaid Expansion: A Roundup of What
Each State’s Leadership Has Said about their Medicaid Plans, Updated May 24, 2013; Alavere, State Reform Insights,
Updated May 30, 2013.
50
U.S. Census Bureau, American Community Survey, 2011; Medicaid and CHP Payment and Access Commission,
Report to the Congress on Medicaid and CHIP, March 2012.
51
State Refor(u)m, Tracking Medicaid Expansion Decisions: A Closer Look at Legislative Activity, Updated May 9,
2013; The Advisory Board Company, Where Each State Stands on ACA’s Medicaid Expansion: A Roundup of What
Each State’s Leadership Has Said about their Medicaid Plans, Updated May 24, 2013; Alavere, State Reform Insights,
Updated May 30, 2013.
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nondisabled adults under age 65.52nondisabled adults under age 65.55 Depending on how the Secretary chooses to distribute the
Medicaid DSH reductions for FY2016 and subsequent years, by implementing the ACA Medicaid
expansion, these states might increase the magnitude of their DSH reductions.
Again, depending on how the Secretary decides to distribute the DSH reductions among the
states, as states’ percentages of uninsured individuals decline more than other states’, their
percentages of the DSH reductions could increase; and as states’ percentages of uninsured
individuals reduce less than other states’, their percentages of DSH reductions could decrease.
The percentages of uninsured individuals for states that do implement the expansion are expected
to reduce significantly more than those for states that do not implement the expansion. As a result,
depending on how the Secretary administers the DSH reductions, states that choose not to
implement the ACA Medicaid expansion could have relatively smaller percentage DSH
reductions than they otherwise would have had because these states are expected to have
relatively larger uninsured populations.
While states’ decisions about the ACA Medicaid expansion have potential implications for states’
Medicaid DSH reductions, states’ decisions about whether or not to implement the ACA Medicaid
expansion are complicated. The factors states are considering include the state cost of Medicaid
coverage for the newly eligible adults; the state cost of the increase in Medicaid coverage for
individuals thatwho are currently eligible but not enrolled in Medicaid; potential state savings from
current state-funded programs for individuals that will gain Medicaid coverage; and the economic
value of additional health care spending for the state economy.5356
Potential Medicaid DSH reductions are not a significant factor in states’ decisions whether or not
to implement the ACA Medicaid expansion because the impact of the Medicaid DSH reductions
pales in comparison to other potential impacts. For instance, while the aggregate Medicaid DSH
reductions from FY2014 to FY2021 total $22 billion, if all states implement the ACA Medicaid
expansion it is estimated that all the ACA health insurance coverage provisions would reduce
uncompensated care by $183 billion.54
Impact on Hospitals
Hospitals are concerned about whether their states will implement the ACA Medicaid expansion
because the DSH allotments will be reduced by the same total national amount whether or not
states implement the expansion. If a state implements the expansion, the uncompensated care for
hospitals should decline along with the DSH allotments (though not proportionally). However, if
a state chooses not to implement the expansion, the demand for uncompensated hospital care is
expected to persist but the amount of Medicaid DSH payments hospitals receive to subsidize such
care may be reduced.55 As a result, hospitals could be expected to encourage states to implement
52
Ibid.
57
53
U.S. Census Bureau, American Community Survey, 2011; Medicaid and CHP Payment and Access Commission,
Report to the Congress on Medicaid and CHIP, March 2012.
54
State Refor(u)m, Tracking Medicaid Expansion Decisions: A Closer Look at Legislative Activity, Updated May 9,
2013; The Advisory Board Company, Where Each State Stands on ACA’s Medicaid Expansion: A Roundup of What
Each State’s Leadership Has Said about their Medicaid Plans, Updated May 24, 2013; Alavere, State Reform Insights,
Updated May 30, 2013.
55
Ibid.
56
Deborah Bachrach, Medicaid Expansion: Factors for State Evaluation, Presentation at Alliance for Health Reform
and Kaiser Family Foundation briefing titled The Medicaid Expansion: What’s at Stake for States?, November 30,
2012.
5457
John Holahan, Matthew Buettgens, and Caitlin Carroll, et al., The Cost and Coverage Implications of the ACA
Medicaid Expansion: National and State-by-State Analysis, Kaiser Commission on Medicaid and the Uninsured,
Publication #8384, November 2012.
55
Letter from the Republican Governors Public Policy Committee to President Barack Obama dated July 10, 2012,
available at http://www.scribd.com/doc/99730375/Medicaid-and-Exchange-Letter-Final. Sarah Kliff, “The super
wonky reason states may join the Medicaid expansion,” The Washington Post, July 8, 2012. Bob Neal, The Fiscal and
(continued...)
53
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the ACA Medicaid expansion in order to reduce the uncompensated care for hospitals. Even
though Medicaid provider rates are generally lower than the rates paid by private insurance or
Medicare, hospitals would rather receive payment from a Medicaid patient than have no payment
(continued...)
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Impact on Hospitals
Hospitals in states that are not expanding are concerned because the DSH allotments will be
reduced by the same total national amount whether or not states implement the expansion. If a
state implements the expansion, the uncompensated care for hospitals should decline along with
the DSH allotments (though not proportionally). However, if a state chooses not to implement the
expansion, the demand for uncompensated hospital care is expected to persist but the amount of
Medicaid DSH payments hospitals receive to subsidize such care may be reduced.58 As a result,
hospitals have been encouraging their states to implement the ACA Medicaid expansion in order
to reduce the uncompensated care for hospitals. Even though Medicaid provider rates are
generally lower than the rates paid by private insurance or Medicare, hospitals would rather
receive payment from a Medicaid patient than have no payment from an uninsured patient.
DSH Payments
Medicaid state plans must include explanations for how DSH hospitals are defined and how DSH
payments are calculated. There are federal requirements that states must follow in making these
determinations, but for the most part, states are provided significant flexibility in defining DSH
hospitals and calculating DSH payments.
Defining DSH Hospitals
The federal government provides states with the following three criteria for identifying DSH
hospitals.
•
At a minimum, states must provide DSH payments to all hospitals with (1) a
Medicaid inpatient utilization rate56rate59 in excess of one standard deviation57deviation60 above
the mean rate for the state or (2) a low-income utilization rate58rate61 of 25%.
•
All DSH hospitals must retain at least two obstetricians with staff privileges
willing to serve Medicaid patients.59
•
A hospital cannot be identified as a DSH hospital if its Medicaid utilization rate
is below 1%.
As long as states include all hospitals meeting the criteria, states can identify as many or as few
hospitals as DSH hospitals. Because of the flexibility, there is a great deal of variation across the
states in the proportion and types of hospitals designated as DSH hospitals. Some states target
their DSH funds to a few hospitals, while other states provide DSH payments to all the hospitals
in the state with Medicaid utilization rates above 1%.60 For instance, in FY2007, Oregon provided
(...continued)62
(...continued)
Medicaid Expansion: National and State-by-State Analysis, Kaiser Commission on Medicaid and the Uninsured,
Publication #8384, November 2012.
58
Letter from the Republican Governors Public Policy Committee to President Barack Obama dated July 10, 2012,
available at http://www.scribd.com/doc/99730375/Medicaid-and-Exchange-Letter-Final. Sarah Kliff, “The super
wonky reason states may join the Medicaid expansion,” The Washington Post, July 8, 2012. Bob Neal, The Fiscal and
Economic Impacts of Medicaid Expansion in Mississippi, 2014-2025, Mississippi Public Universities University
Research Center, October 2012.
5659
The formula for the Medicaid utilization rate is the number of days of care furnished to Medicaid beneficiaries
during a given period divided by the total number of days of care provided during the period. (§1923(b)(2) of the Social
Security Act).
5760
The “standard deviation” is a statistical measure of the dispersion of hospitals’ utilization rates around the average;
the use of this measure identifies hospitals whose Medicaid utilization is unusually high.
5861
The formula for the low-income utilization rate is the sum of two fractions. The first fraction is total Medicaid
revenue for services plus other payments from state and local governments divided by the total amount of hospital
revenue for patient services. The second fraction is the total amount of hospital charges for inpatient hospital services
minus the total amount of revenue from state and local governments divided by total hospital charges. (§1923(b)(3) of
the Social Security Act).
59
There are exceptions to this rule for children’s hospitals, hospitals that do not offer non-emergency obstetric services,
and certain rural hospitals. (§1923(d) of the Social Security Act).
60
Courtney Burke, “Health Reform: Uncompensated Care Costs and Reductions In Medicaid DSH Payments,” Health
Affairs Blog, October 15, 2010.
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Medicaid Disproportionate Share Hospital Payments
•
A hospital cannot be identified as a DSH hospital if its Medicaid utilization rate
is below 1%.
As long as states include all hospitals meeting the criteria, states can identify as many or as few
hospitals as DSH hospitals. Because of the flexibility, there is a great deal of variation across the
states in the proportion and types of hospitals designated as DSH hospitals. Some states target
their DSH funds to a few hospitals, while other states provide DSH payments to all the hospitals
in the state with Medicaid utilization rates above 1%.63 For instance, in FY2007, Oregon provided
DSH payments to 9 out of 58 hospitals, and New Jersey provided DSH payments to all of the
hospitals in the state.6164
Calculating DSH Payments
States are also provided a good deal of flexibility in terms of the formulas and methods they use
to distribute DSH funds among DSH hospitals. The federal government provides minimum and
maximum payment criteria, but otherwise federal law does not address the specific payment
amounts states should provide to each DSH hospital.
States must make minimum payments to DSH hospitals using one of three methodologies:6265
•
the Medicare DSH methodology,63
•
a formula providing Medicaid DSH payments that increase in proportion to the
percentage by which the hospital’s Medicaid inpatient utilization rate exceeds
one standard deviation above the mean, or
•
a formula that varies DSH payments according to the type of hospitals.6466
DSH payments to individual hospitals are subject to a cap.6567 This hospital-specific limit prohibits
DSH payments from being greater than 100% of the cost of providing inpatient and outpatient
services to Medicaid and uninsured patients less payments received from Medicaid and uninsured
patients.66
The Definition of Uninsured
Under the hospital-specific DSH limit, uninsured is defined in the statute as individuals who
“have no health insurance (or other source of third-party coverage) for the services furnished
61
CRS review of DSH annual reports and the American Hospital Association Hospital Statistics (2012 Edition).
§1923(c) of the Social Security Act.
63
Medicare DSH funds are paid to qualifying hospitals through an adjustment within the applicable prospective
payment system (PPS). Generally, DSH hospitals receive the additional payments based on a DSH patient percentage
(DPP) which is calculated by adding the proportion of a hospital’s Medicare inpatient days provided to poor Medicare
beneficiaries (those who receive Supplemental Security Income or SSI) to the proportion of total hospital days provided
to Medicaid recipients. A few urban acute care hospitals receive DSH payments under an alternative formula. An acute
care hospital will not receive operating DSH payments unless its low-income patient share or DPP exceeds 15%. After
that minimum threshold of 15% is met, the size of a hospital’s DSH adjustment will vary by the hospital’s bed size,
urban or rural location, or whether it receives special treatment as a rural referral center (RRC). Under the current
operating DSH thresholds and formulas, the DSH adjustment that a small urban or rural hospital can receive is capped
at 12%, while large (100 beds and more) urban hospitals, large rural hospitals (500 beds and more). Also, Medicare
dependent hospitals and RRCs can receive an uncapped adjustment that can be significantly greater.
6468
(...continued)
62
There are exceptions to this rule for children’s hospitals, hospitals that do not offer non-emergency obstetric services,
and certain rural hospitals. (§1923(d) of the Social Security Act).
63
Courtney Burke, “Health Reform: Uncompensated Care Costs and Reductions In Medicaid DSH Payments,” Health
Affairs Blog, October 15, 2010.
64
CRS review of DSH annual reports and the American Hospital Association Hospital Statistics (2012 Edition).
65
§1923(c) of the Social Security Act.
66
If a state chooses to reimburse according to the type of hospital, the state must ensure that all hospitals of each type
are treated equally and payments are reasonably related to the hospitals’ Medicaid or low-income patient cost, volume,
or proportion of Medicaid or low-income patients.
6567
§1923(g) of the Social Security Act.
6668
In California, the hospital-specific cap for public hospitals is 175% of the unreimbursed costs. California’s hospitalspecific DSH cap for public hospitals was established in the Balanced Budget Act of 1997 (P.L. 105-33) and made
permanent by the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 (which was included in
the Consolidated Appropriations Act of 2000, P.L. 106-113).
62
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The Definition of Uninsured
Under the hospital-specific DSH limit, uninsured is defined in the statute as individuals who
“have no health insurance (or other source of third-party coverage) for the services furnished
during the year.”69during the year.”67 In the past, CMS has provided conflicting guidance regarding this definition,
and, in January 2012, CMS issued a proposed rule to address this issue.6870
The hospital-specific limit was implemented through the Omnibus Reconciliation Act of 1993
(P.L. 103-66), and, following the passage of the law, CMS did not issue a rule. However, CMS
did issue a State Medicaid Director Letter delineating the agency’s interpretation of the statute,
which stated that individuals who have no health insurance (or other third party coverage) for the
services provided during the year include those “who do not possess health insurance which
applies to the service for which the individual sought treatment.”6971
This interpretation remained in effect until January 19, 2009, which was the effective date for the
2008 DSH final rule implementing the DSH auditing and reporting requirements (these
requirements are discussed later in the report in the section titled “State Reporting and Auditing
Requirements”).7072 In promulgating the 2008 DSH final rule, CMS defined “uninsured” as
individuals who do not have a legally liable third party payer for hospital services.7173 The 2008
DSH final rule relied on the existing regulatory definition of creditable coverage developed to
implement the Health Insurance Portability and Accountability Act of 1996 (P.L. 104-191). The
definition of uninsured from the 2008 final rule superseded the guidance from the 1994 State
Medicaid Director Letter.
Concerns were raised about the new definition of uninsured because this definition appeared to
exclude from uncompensated care (for Medicaid DSH purposes) the costs of many services that
were provided to individuals with creditable coverage but were outside the scope of such
coverage. For instance, the definition excluded individuals who exhausted their insurance benefits
and who reached lifetime insurance limits for certain services, as well as services not covered in a
benefit package.
In response to these concerns, CMS issued a proposed rule on January 18, 2012, that would
change the definition of uninsured for Medicaid DSH purposes to a service-specific definition.
The proposed definition would require a determination of whether, for each specific service
furnished during the year, the individual has third party coverage. As a result, under the proposed
definition, the following services would be included would include services not within a covered benefit
package and services beyond the
annual and lifetime limits.72
6774
69
§1923(g)(1)(A) of the Social Security Act.
A final rule has not been published. (Department of Health and Human Services’ Centers for Medicare & Medicaid,
“Medicaid Program;
Disproportionate Share Hospital Payments - Uninsured Definition,” 77 Federal Register 2500,
January 18, 2012.
69)
71
State Medicaid Directors letter, August 17, 1994.
7072
The reporting requirements originally established in the Balanced Budget Act of 1997 (P.L. 105-33) were extended
by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA, P.L. 108-173).
7173
Department of Health and Human Services’ Centers for Medicare & Medicaid Services, “Medicaid Program:
Disproportionate Share Hospital Payments,” 73 Federal Register 77904, December 19, 2008.
7274
Department of Health and Human Services’ Centers for Medicare & Medicaid, “Medicaid Program;
Disproportionate Share Hospital Payments - Uninsured Definition,” 77 Federal Register 2500, January 18, 2012.
6870
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Institutions for Mental Disease (IMD) DSH Limits
Federal statute limits the amount of DSH payments for IMDs73IMDs75 and other mental health
facilities.7476 DSH payments to IMDs and other mental health facilities above the state-specific
dollar limit are not eligible for federal matching funds.
Each state receives an IMD DSH limit that is the lesser of:
•
a state’s FY1995 total IMD and other mental health facility DSH expenditures
(i.e., including both state and federal spending) applicable to the state’s FY1995
DSH allotment as reported on the Form CMS-64 as of January 1, 1997, or
•
the amount equal to the product of the state’s current year total DSH allotment
and the applicable percentage, which is the lesser of 33% or the percent of
FY1995 DSH expenditures that went to mental health facilities.
The IMD DSH limits fit within the state DSH allotments. In other words, when DSH payments to
hospitals and IMDs and other mental health facilities are summed together, the total is required to
be less than or equal to the state’s DSH allotments in Table 2.
As with the DSH allotments, the IMD DSH limits are published in periodic Federal Register
notices. In Appendix C, Table C-1 includes each state’s preliminary IMD DSH limit for
FY2012.
DSH Expenditures
The implementation of the DSH allotments effectively controlled the significant growth of DSH
expenditures from the early 1990s. As shown in Figure 3, total Medicaid DSH expenditures (i.e.,
including both federal and state expenditures) have remained relatively stable since the
implementation of the federal DSH allotments in FY1993. In FY2012, DSH expenditures totaled
$17.1 billion, and the federal share of those payments was $9.6 billion.
7377
75
An “institution for mental diseases” is defined as “a hospital, nursing facility, or other institution of more than 16
beds, that is primarily engaged in providing diagnosis, treatment, or care of persons with mental diseases, including
medical attention, nursing care and related services.” (§1905(i) of the Social Security Act)
7476
§1923(h) of the Social Security Act.
77
In FY2012, the federal DSH allotments (i.e., the maximum amount of federal matching funds that each state can
claim for Medicaid DSH payments) to states totaled $11.4 billion.
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Figure 3.Total Medicaid DSH Expenditures, FY1990-FY2012
($ in billions)
$20.0
$18.0
$16.0
$14.0
$12.0
$10.0
$8.0
$6.0
$4.0
$2.0
$0.0
Source: Payments estimated by the Urban Institute for FY1990-FY1992; data from CMS for FY1993-FY1996;
CMS-64 data for FY1997-FY2012.
Notes: Total Medicaid DSH expenditures include both federal and state spending and payments to both
hospitals and institutions for mental disease. Data for FY2012 is preliminary.
DSH expenditures are different from DSH allotments. DSH expenditures are the amounts paid to hospitals, and
DSH allotments reflect the maximum amount of federal DSH funding available to states.
While Medicaid DSH expenditures have been relatively stable, total Medicaid medical assistance
expenditures (i.e., including federal and state expenditures and excluding expenditures on
administrative activities) have generally grown at a rate faster than the economy as measured by
the gross domestic product for the period of FY1990 to FY2009. Since FY2010, total Medicaid
DSH expenditures have decreased slightly from year to year.
The law establishing DSH allotments (i.e., Medicaid Voluntary Contribution and ProviderSpecific Tax Amendments of 1991, P.L. 102-234) specified a national DSH payment limit equal
to 12% of the total amount of Medicaid medical assistance spending (i.e., including federal and
state expenditures and excluding expenditures for administrative activities) for all 50 states and
the District of Columbia.7578 This is a target but not an absolute cap.
TheAs mentioned earlier, the national DSH payment limit is different from the state-specific 12%
12% limit on state DSH allotments because
the 12% national payment limit restricts both federal and
78
42 C.F.R. §447.297.
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Medicaid Disproportionate Share Hospital Payments
state spending while the 12% limit for
allotments caps only federal spending. The national DSH
payment target states that aggregate
DSH payments (including federal and state expenditures)
should not be more than 12% of the
75
42 C.F.R. §447.297.
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Medicaid Disproportionate Share Hospital Payments
total amount of Medicaid medical assistance expenditures for
all 50 states and the District of
Columbia. The federal statute limits state DSH allotments (i.e., the
maximum amount of
Medicaid DSH federal funds) to no more than 12% of each state’s total
Medicaid medical
assistance expenditures (i.e., including federal and state expenditures but excluding
excluding administrative expenditures), which means the federal share of DSH expenditures
cannot be more
than 12% of each state’s total Medicaid medical assistance expenditures.
This means if a state receives a federal DSH allotment equal to 12% of its total Medicaid medical
assistance expenditures and the state uses all of its federal DSH allotment, then with the state
matching funds, the state would provide DSH payments in excess of 12% of its total Medicaid
medical assistance expenditures. As a result, it is possible that the national DSH target could be
surpassed even if state DSH allotments are subject to the 12% limit. However, as shown in
Figure 4, the implementation of DSH allotments effectively brought DSH payments under the
12% national target within a few years. DSH allotments were implemented in FY1993, and total
DSH expenditures fell below 12% of total Medicaid medical assistance expenditures in FY1996.
In FY2012, total DSH expenditures were 4.2% of the total Medicaid medical assistance
expenditures.
Figure 4.Total DSH Expenditures as a Percentage of Total Medicaid Medical
Assistance Expenditures
FY1990 to FY2012
16.0%
15.0%
14.0%
12.5%
12.0%
10.2%
10.0%
9.9%
8.0%
6.0%
5.2%
5.4%
4.2%
4.0%
2.0%
1.3%
0.0%
Sources: CRS calculation using DSH payment estimates from the Urban Institute for FY1990-FY1992; DSH
payment data from Centers for Medicare & Medicaid Services (CMS) for FY1993-FY1996; DSH payment data for
FY1997-FY2011 and medical assistance expenditure data for FY1990-FY2011 from Form CMS-64 data.
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Medicaid Disproportionate Share Hospital Payments
Notes: Total DSH expenditures and total Medicaid medical assistance expenditures (i.e., excluding expenditures
for administrative activities) include both the federal and state expenditures. Data for FY2012 is preliminary.
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DSH expenditures are highly concentrated in a few states. As shown in Figure 5, five states (New
York, California, Texas, New Jersey, and Pennsylvania) accounted for more than half of the
FY2011 DSH expenditures, and 10 states accounted for over two-thirds of all DSH expenditures.
It makes sense that some of these states (New York, California, Texas, New Jersey, Pennsylvania,
and Ohio) accounted for a large portion of the total Medicaid DSH expenditures because these
states were among the top 10 highest-spending states in terms of total medical assistance
expenditures (i.e., including federal and state expenditures and excluding expenditures for
administrative activities) for FY2011. On the other hand, Missouri, Louisiana, South Carolina,
and Alabama ranked 15th, 22nd, 25th, and 26th (respectively) in terms of total medical assistance
expenditures (i.e., including federal and state expenditures and excluding expenditures for
administrative activities) for FY2011, but these states were among the top 10 highest Medicaid
expenditures statesspending
states in terms of Medicaid DSH expenditures. This means Missouri, Louisiana, South Carolina,
and Alabama spend larger
proportions of their Medicaid budgets on Medicaid DSH payments
relative to most other states.7679
Figure 5. States’ Share of Total Medicaid DSH Expenditures
FY2011
New York, 18%
Remaining States, 30%
California, 13%
Alabama, 3%
South Carolina, 3%
Texas, 9%
Louisiana, 4%
Ohio, 4%
Missouri, 4%
Pennsylvania, 5%
New Jersey, 7%
Source: CRS calculation using Centers for Medicare & Medicaid Services’ Form CMS-64 data from FY2011.
Notes: The states included in the “remaining states” category had DSH expenditures that accounted for less
than 3% of total DSH expenditures. In Appendix D, Table D-1 shows state-by-state DSH spending. FY2011 is
the most recent data available.
76
79
In FY2011, only New Jersey and New Hampshire spent a larger proportion of their Medicaid budget (i.e., Medicaid
DSH payments as a percentage of medical assistance expenditures) than Missouri, Louisiana, South Carolina, and
Alabama.
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Notes: The states included in the “remaining states” category had DSH expenditures that accounted for less
than 3% of total DSH expenditures. In Appendix D, Table D-1 shows state-by-state DSH spending. FY2011 is
the most recent data available.
State Variation
As mentioned previously, there is significant variation among the states in how each state DSH
program is structured, and there is also variation from state to state with respect to DSH
expenditures. Two distinct differences are (1) the percent of a state’s total Medicaid medical
assistance expenditures (i.e., including federal and state expenditures and excluding expenditures
for administrative activities) a state’s DSH expenditures account for and (2) the proportion of
DSH payments going to hospitals versus IMDs.
DSH as a Percentage of Total Medical Assistance Expenditures
Figure 6 shows FY2011 total DSH expenditures (i.e., including both federal and state
expenditures) as a percentage of total Medicaid medical assistance expenditures (i.e., including
federal and state expenditures and excluding expenditures for administrative activities). DSH
expenditures made in FY2011 ranged from 0.1% of total Medicaid medical assistance
expenditures in South Dakota and Wyoming to 12.1% in New Jersey.
Figure 6.Total State DSH Expenditures as a Percentage of Total Medicaid Medical
Assistance Expenditures
FY2011
Source: CRS calculation using Centers for Medicare & Medicaid Services’ Form CMS-64 data for FY2011,
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Notes: Total DSH expenditures and total Medicaid medical assistance expenditures (i.e., excluding expenditures
for administrative activities) include both the federal and state share of expenditures. FY2011 is the most recent
data available.
Massachusetts does not have DSH expenditures because Massachusetts’ Section 1115 waiver allows the state to
use its DSH allotment to fund the state’s Health Safety Net which reduces the number of uninsured in
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Massachusetts. In Appendix D, Table D-1 shows each state’s total DSH expenditures and total Medicaid
medical assistance expenditures.
In FY2011, one state (New Jersey) had DSH expenditures in excess of 12% of total Medicaid
medical assistance expenditures,7780 which was the threshold used to determine “high” DSH states
when DSH allotments were first implemented.7881 This is down from FY1993, when 21 states were
considered “high” DSH states.
Hospital Versus IMD
Nationally, 83% of DSH expenditures are allocated to hospitals, and the remaining 17% is
distributed to IMDs and other mental health facilities. This distribution varies by state. As shown
in Figure 7, in FY2011, most states targeted their DSH expenditures to hospitals, with 15 states79states82
allocating all of their DSH expenditures to hospitals. Other states focused their DSH expenditures
on IMDs and other mental health facilities. Three states (South Dakota, Maine, and Delaware)
made all of their DSH expenditures to IMDs and other mental health facilities.
7780
The 12% limit on DSH allotments caps the federal share of DSH expenditures to no more than 12% of a state’s total
Medicaid medical assistance expenditures. However, when the federal DSH allotment funds are matched with the state
share of the Medicaid DSH payments, a state could provide DSH payments in excess of 12% of its total Medicaid
medical assistance expenditures.
7881
When DSH allotments were first implemented, states with DSH expenditures greater than 12% of their total
Medicaid medical assistance expenditures were classified as “high-DSH” states, and “high-DSH” states did not receive
annual increases to their DSH allotment.
7982
The fifteen states allocating all of their DSH expenditures to hospitals are Colorado, Georgia, Hawaii, Idaho, Iowa,
Mississippi, Montana, Nebraska, Nevada, Rhode Island, Tennessee, Utah, Vermont, Wisconsin, and Wyoming.
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Figure 7. Proportion of State DSH Expenditures Allocated to Hospitals and IMDs
FY2011
California
Colorado
Georgia
Hawaii
Idaho
Iowa
Mississippi
Montana
Nebraska
Nevada
Rhode Island
Tennessee
Utah
Vermont
Wisconsin
Wyoming
Minnesota
Alabama
New Mexico
Arkansas
Virginia
Oklahoma
District of Columbia
South Carolina
Ohio
Michigan
Louisiana
Arizona
New York
Illinois
Kentucky
New Hampshire
Texas
Missouri
West Virginia
New Jersey
Florida
Indiana
Kansas
Pennsylvania
Washington
North Carolina
Oregon
Connecticut
North Dakota
Maryland
Alaska
Delaware
Maine
South Dakota
0%
25%
50%
Hospitals
75%
100%
IMD
Source: CRS calculation using Centers for Medicare & Medicaid Services’ Form CMS-64 data from FY2011.
Notes: Table D-1 shows each state’s hospital and IMD DSH expenditures. FY2011 is the most recent data
available.
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IMD = Institutions for Mental Diseases and other mental health facilities.
State Reporting and Auditing Requirements
Since FY1993, each state has been required to provide quarterly reports with information about
the aggregate DSH payments made to hospitals. Then, in 1997 and again in 2003, Congress
enhanced the DSH reporting requirements in response to HHS Office of the Inspector General
audits and Government Accountability Office reports detailing state violations in the DSH
program.
The Balanced Budget Act of 1997 (BBA, P.L. 105-33) required states to provide an annual report
to the Secretary of HHS describing the method used to target DSH funds and to calculate DSH
payments. Then, in 2003, MMA mandated that beginning in state plan rate year80year83 (SPRY) 2005,
states were required to submit annual reports and independently certified audits.8184
States’ annual DSH reports must provide detailed information about each hospital receiving a
DSH payment. For each hospital, the report must include the following information: the hospitalspecific DSH limit, the Medicaid inpatient utilization rate, the low income utilization rate, statedefined DSH qualification criteria, Medicaid basic payments, other supplemental payments, total
Medicaid uncompensated care, total uninsured uncompensated care, federal Section 1011
payments,8285 and DSH payments.
The annual independent certified audits must verify that hospitals retain the DSH payment; DSH
payments are made in accordance with the hospital-specific DSH limits; uncompensated care
only includes inpatient and outpatient services; and the state separately documented and retains
records of DSH payments (including the methodology for calculating each hospital’s DSH
payments).
The annual independent certified audits must be completed by the last day of the federal fiscal
year ending three years from the end of the SPRY under audit. The annual DSH reports are due at
the same time as the independent certified audits. If a state does not submit the independent
certified audit by this deadline, the state could lose the federal DSH matching funds for the
SPRYs subsequent to the date the audit is due.8386
To ensure a period for developing and refining the reporting and auditing techniques, findings of
state reports and audits for SPRY2005 to SPRY2010 will not be given weight except to the extent
8083
Medicaid state plan rate year means the 12-month period defined by a state’s approved Medicaid state plan in which
the state estimates eligible uncompensated care costs and determines corresponding DSH payments as well as all other
Medicaid payment rates. The period usually corresponds with the state’s fiscal year or the federal fiscal year but can
correspond to any 12-month period defined by the state as the Medicaid state plan rate year.
8184
§1923(j) of the Social Security Act.
8285
Under §1011 of MMA, hospitals, physicians, and ambulance service providers are eligible for §1011 payments for
services furnished to the following types of patients: undocumented aliens; aliens who have been paroled into a United
States port of entry for the purpose of receiving eligible services; and Mexican citizens permitted to enter the United
States on a laser visa, issued in accordance with the requirements of regulations prescribed under the Immigration and
Nationality Act. (Centers for Medicare & Medicaid Services, Section 1011: Fact Sheet Federal Reimbursement of
Emergency Health Services Furnished to Undocumented Alien.)
8386
42 CFR 455.304(a).
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Medicaid Disproportionate Share Hospital Payments
that the findings draw into question the reasonableness of the state uncompensated care cost
estimates used for calculations of prospective DSH payments. For SPRY2011 and after, audit
findings demonstrating that DSH payments exceed the hospital-specific cost limit will be
regarded as discovery of overpayment to providers. This will require the state to return the federal
share of the overpayment to the federal government (unless the DSH payments are redistributed
to other qualifying hospitals).8487
Conclusion
Since DSH allotments were implemented in FY1993, DSH payments have remained relatively
stable. Over the same period of time, Medicaid medical assistance expenditures have generally
(i.e., including
federal and state expenditures and excluding expenditures for administrative activities) have
generally grown at a rate faster than the economy (as measured by the gross domestic product).
As a result,
total DSH expenditures have dropped as a percentage of total Medicaid medical assistance
assistance expenditures from 15.0% in FY1992 to 4.2% in FY2011.
Over the next few years, DSH expenditures will continue to decline as a percentage of Medicaid
medical assistance expenditures due to the ACA DSH reductions. The impact of these reductions
will vary by state according to the uninsurance rate of each state; whether a state is a “low DSH
state”; and how a state targets its DSH payments.
Currently, the DSH reductions are slated to end in FY2022 with state DSH allotments returning to
the level states would have received without the DSH reduction for FY2023 and subsequent
years. However, the future of Medicaid DSH payments is uncertain. Congress may decide to
extend the DSH reductions, as Congress did with the Middle Class Tax Relief and Job Creation
Act of 2012 and ATRA. Also, as states build experience with the ACA Medicaid expansion, the
role of DSH in Medicaid may be revisited and modified by Congress.
8487
Department of Health and Human Services, Centers for Medicare & Medicaid Services, “Medicaid Program;
Disproportionate Share Hospital Payments,” 73 Federal Register 77904, December 19, 2008.
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Appendix A. A Chronology of State DSH
Allotments Calculations
The Medicaid Voluntary Contribution and Provider-Specific Tax Amendments of 1991 (P.L. 102234) established ceilings on federal Medicaid DSH funding for each state. Since FY1993, each
state has had its own DSH limit, which is referred to as “DSH allotments.” These allotments are
calculated by the Centers for Medicare & Medicaid Services (CMS) and promulgated in the
Federal Register. The methodology for calculating these allotments has changed a number of
times over the years, and these different methodologies are described below.8588
FY1993
The original state DSH allotments provided in FY1993 were based on each state’s FY1992 DSH
payments. This resulted in funding inequities because states that had been providing relatively
more DSH payments to hospitals in FY1992 locked in higher Medicaid DSH allotments (and vice
versa). As a result, the DSH allotment a state receives is not entirely based on the number of DSH
hospitals in the state or the hospital services provided in DSH hospitals to low-income patients.
FY1994 to FY1997
The DSH allotments for FY1994 to FY1997 were based on each state’s prior year DSH allotment.
The annual growth for each state’s DSH allotment depended on whether a state was classified as a
“high-DSH” or “low-DSH” state. States with DSH expenditures greater than 12% of their total
Medicaid medical assistance expenditures (i.e., federal and state Medicaid expenditures excluding
expenditures for administrative activities) were classified as “high-DSH” states, and “high-DSH”
states did not receive an increase to their DSH allotment. States with DSH expenditures less than
12% of their total Medicaid medical assistance expenditures were classified as “low-DSH” states,
and the growth factor for the DSH allotment for “low-DSH” states was the projected percentage
increase for each state’s total Medicaid expenditures (i.e., including federal and state spending)
for the current year. However, “low-DSH” states’ DSH allotments could not exceed 12% of each
state’s total medical assistance expenditures.8689
FY1998 to FY2000
Provisions included in the Balanced Budget Act of 1997 (BBA, P.L. 105-33) reduced Medicaid
DSH expenditures by replacing the state DSH allotment calculations with fixed state DSH
allotments specified in statute for FY1998 through FY2002.8790 The aggregate fixed allotments for
FY1998 totaled $10.3 billion, which was a 50% decrease from the aggregate FY1997 DSH
allotments. The aggregate allotments for FY1999 and FY2000 decreased to $10.0 billion and $9.3
billion respectively.
8588
Tennessee and Hawaii have had special statutory arrangements for their federal DSH funding since FY2007.
The definition of “low-DSH” state has changed over the years.
8790
§1923(f)(2) of the Social Security Act.
8689
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Adjustments for Specific States
A number of legislative adjustments were made to the BBA fixed DSH allotments. The
Departments of Labor, Health and Human Services, and Education, and Related Agencies
Appropriations Act, 1998 (P.L. 105-78) increased the FY1998 DSH allotments for Minnesota and
Wyoming. The Omnibus Consolidated and Emergency Supplemental Appropriations Act, 1999
(P.L. 105-277) increased the FY1999 DSH allotments for Minnesota, New Mexico, and
Wyoming. The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999
(included in the Consolidated Appropriations Act 2000, P.L. 106-113) increased the FY2000,
FY2001, and FY2002 DSH allotments for the District of Columbia, Minnesota, New Mexico, and
Wyoming.
FY2001 and FY2002
The fixed state allotments were supposed to last through FY2002 with the aggregate DSH
allotments slated to decrease in FY2001 and again in FY2002. However, the Medicare, Medicaid,
and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA, which was incorporated
into the Consolidated Appropriations Act of 2001, P.L. 106-554) eliminated the DSH reductions
for FY2001 and FY2002 and provided states with increases to their DSH allotments. Specifically,
the DSH allotments for those two years were determined by increasing each state’s prior year
DSH allotment by the percent change in the Consumer Price Index for all Urban Consumers
(CPI-U) for the prior fiscal year. These state DSH allotments could not exceed 12% of a state’s
total medical assistance expenditures for the allotment year. This is referred to as the 12% rule.8891
Extremely Low DSH States
BIPA also established a special rule for DSH allotments for “extremely low DSH states,” which
were defined as states with FY1999 DSH expenditures greater than 0% and less than 1% of total
Medicaid medical assistance expenditures (i.e., federal and state Medicaid expenditures excluding
expenditures for administrative activities).8992 The FY2001 DSH allotments for extremely low DSH
states were increased to 1% of each state’s FY2001 total medical assistance expenditures. Then,
the FY2002 DSH allotments for extremely low DSH states were each state’s FY2001 DSH
allotment increased by the percentage change in CPI-U for FY2001, subject to the 12% rule.9093
FY2003
For non-extremely low DSH states, FY2003 DSH allotments were each state’s FY2002 fixed
DSH allotment determined in BBA (i.e., not states’ actual DSH allotment for FY2002 as provided
by BIPA) increased by the percent change in CPI-U for FY2002, subject to the 12% rule. For
most states, the FY2002 state DSH allotments provided by BBA were less than the actual state
allotments states received in FY2002. As a result, in general, FY2003 DSH allotments were lower
8891
Department of Health and Human Services’ Center for Medicare & Medicaid Services, “Medicaid Program;
Disproportionate Share Hospital Payments,” 69 Federal Register 15850, March 26, 2004.
8992
Ten states were classified as extremely low DSH states for FY2001 and FY2002: Arkansas, Idaho, Iowa, Montana,
Nebraska, North Dakota, South Dakota, Utah, Virginia, and Wisconsin.
9093
Department of Health and Human Services’ Center for Medicare & Medicaid Services, “Medicaid Program;
Disproportionate Share Hospital Payments,” 69 Federal Register 15850, March 26, 2004.
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Medicaid Disproportionate Share Hospital Payments
than the allotments states received in FY2002.9194 This was not the case for extremely low DSH
states, which received FY2003 DSH allotments based on their actual FY2002 DSH allotment
increased by percentage change in CPI-U for FY2002.9295
FY2004
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA, P.L. 108173) addressed the drop in DSH allotments for many states from FY2002 to FY2003 by
exempting FY2002 DSH allotment amounts from the 12% rule and providing a 16% increase in
DSH allotments for FY2004.
Low DSH States
MMA also discontinued the special arrangement for extremely low DSH states and instead
established low DSH states—defined as those states in which total DSH payments for FY2000
were less than 3% of the state’s total Medicaid medical assistance expenditures. For such states,
FY2004 DSH allotments were each state’s FY2003 DSH allotment increased by 16%.
After FY2004
State DSH allotments for years after FY2004 are set to be equal to each state’s FY2004 DSH
allotment, unless a state’s allotment as determined by the calculation in place prior to MMA
would equal or exceed the FY2004 allotment for that state. For any years a state’s DSH
allotments would be higher under the pre-MMA calculation, that state’s DSH allotment will be
equal to its DSH allotment from the prior fiscal year increased by the percentage change in the
CPI-U for the prior fiscal year, subject to the 12% rule.9396
Low DSH States
By statute, the definition of low DSH state is a state with FY2000 DSH expenditures greater than
0% but less that 3% of total Medicaid medical assistance expenditures for FY2000. So states
determined to be low DSH states in FY2004 continue to be low DSH states regardless of the
states’ DSH expenditures in years after FY2000.
For FY2004 through FY2008, low DSH states received DSH allotments in each year equal to
each state’s prior year DSH allotment increased by 16%, subject to the 12% rule. For FY2009
forward, the allotment for low DSH states is equal to the prior year allotment amount increased
by the percentage change in the CPI-U (subject to the 12% rule), which is the same DSH increase
provided to non-low DSH states.
9194
This is referred to as the “DSH dip.”
Department of Health and Human Services’ Center for Medicare & Medicaid Services, “Medicaid Program;
Disproportionate Share Hospital Payments,” 69 Federal Register 15850, March 26, 2004.
9396
Ibid.
9295
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District of Columbia
The Deficit Reduction Act of 2005 (DRA, P.L. 109-171) increased the fixed DSH allotments for
the District of Columbia for FY2000, FY2001, and FY2002 from $32 million to $49 million. This
change was effective as of October 1, 2005. Increasing the District of Columbia’s DSH allotments
for FY2000 to FY2002 was done for the purposes of determining the District of Columbia’s
FY2006 DSH allotment. This change made the District of Columbia’s DSH allotment for FY2006
$57.7 million, which was a $20.0 million increase over what the District of Columbia would have
gotten without the change. The provision took effect on October 1, 2005, and applies to FY2006
and subsequent fiscal years.
FY2009 and FY2010
The American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5) temporarily
increased states’ DSH allotments for FY2009 and FY2010.9497 Specifically, ARRA provided states
with a FY2009 DSH allotment that was 102.5% of the FY2009 allotment states would have
received without ARRA. Then, states’ FY2010 DSH allotments were 102.5% of each state’s
FY2009 DSH allotment as determined under ARRA. For both years, the ARRA DSH provisions
were not applied to the DSH allotments for states that would have had a higher DSH allotment as
determined without application of the ARRA DSH provisions. After FY2010, states’ annual DSH
allotments returned to being determined as they were prior to the enactment of ARRA.95
94
9598
97
98
The ARRA increase to DSH allotments did not apply to the allotments for Hawaii and Tennessee.
§5001(e) of ARRA specifies that the ARRA temporary increase to the FMAP does not apply to DSH payments.
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Medicaid Disproportionate Share Hospital Payments
Appendix B. ACA DSH Reductions
Under the Patient Protection and Affordable Care Act (ACA, P.L. 111-148 as amended), it is
expected that the ACA health insurance coverage expansions will reduce the number of uninsured
individuals served by hospitals starting in 2014. For this reason, theoretically, there will be less
need for DSH payments. As a result, the ACA directs the Secretary of the Department of Health
and Human Services (HHS) to make aggregate reductions in Medicaid DSH allotments from
FY2014 through FY2020.9699
To achieve these aggregate reductions, the Secretary will be required to impose the largest
percentage reductions on states that
•
have the lowest percentage of uninsured individuals (determined on the basis of
data from the Bureau of the Census, audited hospital cost reports, and other
information likely to yield accurate data) during the most recent fiscal year with
available data or
•
do not target their DSH payments to hospitals with high volumes of Medicaid
patients, and hospitals that have high levels of uncompensated care (excluding
bad debt).
ACA also requires the Secretary of HHS to impose smaller percentage reduction on low DSH
states as defined in Section 1923(f)(5)(B) of the Social Security Act. Low DSH states are those
states where total Medicaid DSH payments (including federal and state share) for FY2000 were
between 0% and 3% of total Medicaid medical assistance expenditures (i.e., including Medicaid
spending on health care and excluding expenditures for administrative activities).
Table B-1 shows each state’s percentage of uninsured ranked from highest to lowest. The table
also indicates low DSH state designations. The information in the table is the most recent data
available.
In general, states with the lowest percentage of uninsured individuals can be expected to receive
larger percentage DSH reductions. Also, low DSH states can be expected to receive smaller
percentage DSH reductions. Also, as states’ percentages of uninsured individuals increase or
decrease relative to other states’, due to implementing or not implementing the ACA Medicaid
expansion among other reasons, states’ percentages of the DSH reductions could increase or
decrease accordingly starting in FY2016.
Regardless of whether a state decides to implement the ACA Medicaid expansion or not, all states
could experience a reduction in the percentage of uninsured individuals, due to the woodwork
effect. This is the name for uninsured individuals that are currently eligible but not enrolled in
Medicaid coming out of the woodwork to enroll in Medicaid due to increased media attention and
outreach efforts. The impact of the woodwork effect depends on the percentage of a state’s
population that is currently eligible and not enrolled in Medicaid. Estimates find that, nationally,
9699
The FY2020 DSH reduction was extended to FY2021 through the Middle Class Tax Relief and Job Creation Act of
2012 (P.L. 112-96) and the American Taxpayer Relief Act of 2012 (H.R. 8). Specifically, for FY2021, states’ DSH
allotments will be their FY2020 DSH allotment (as impacted by the aggregate $4.0 billion ACA reduction) increased
by the percentage change in CPI-U for FY2020.
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7.3 million to 9.0 million uninsured children and adults are currently eligible but not enrolled in
Medicaid.97100
Similarly, the uninsured population for all states is expected to decline as new individuals
purchase private health insurance, as the health insurance exchanges and federal premium tax
credits and cost-sharing subsidies become available in 2014.98101
Table B-1. State Factors for DSH Reductions—Percentage of Uninsured Individuals
and Low DSH State Designation
State
Percent Uninsured,
20112012
Rank for Percent
Uninsured
Low DSH State
Texas
23.0Texas
22.5%
1
Nevada
21.922.2%
2
FloridaAlaska
20.95%
3
Alaska
20.1%
4
X
New Mexico
19.8%
5
X
Georgia
19.6%
6
Oklahoma
18.7Florida
20.1%
4
Georgia
18.4%
5
New Mexico
18.4%
6
X
Oklahoma
18.4%
7
X
Montana
18.30%
8
X
California
18.1%
9
Mississippi
17.7%
10
Louisiana
17.5%
11
Arizona
17.2%
12
Arkansas
17.1%
13
South Carolina
16.7%
14
Idaho
16.5%
15
North Carolina
16.3%
16
Oregon
15.7%
17
X
Wyoming
15.4%
18
X
Utah
15.3%
19
X
Colorado
15.1%
20
West Virginia
14.9%
21
Tennessee
14.6%
22
X
X
9717.9%
9
Arizona
17.6%
10
Mississippi
17.0%
11
Louisiana
16.9%
12
South Carolina
16.8%
13
North Carolina
16.6%
14
Arkansas
16.4%
15
X
Idaho
16.2%
16
X
Wyoming
15.4%
17
X
Oregon
14.9%
18
X
Colorado
14.7%
19
Utah
14.5%
20
West Virginia
14.4%
21
Indiana
14.3%
22
State
Low DSH State
X
X
100
Benevieve M. Kenney, Lisa Dubay, Stephen Zuckerman, and Michael Huntress, Opting Out of the Medicaid
Expansion under the ACA: How Many Uninsured Adults Would not Be Eligible for Medicaid?, The Urban Institute
Health Policy Center, July 5, 2012; Benjamin D. Sommers and Arnold M. Epstein, “Perspective: Why States Are So
Miffed about Medicaid - Economics, Politics, and the “Woodwork Effect”,” The New England Journal of Medicine,
vol. 365, no. 2, pp. 100-102.
98101
For more information about the American Health Benefit Exchanges and the federal subsidies, see CRS Report
R42663, Health Insurance Exchanges Under the Patient Protection and Affordable Care Act (ACA), by Bernadette
Fernandez and Annie L. Mach.
Congressional Research Service
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Medicaid Disproportionate Share Hospital Payments
State
Percent Uninsured,
20112012
Rank for Percent
Uninsured
Low DSH State
Indiana
14.5%
23
Kentucky
14.4%
24
Alabama
14.3%
25
Washington
14.2%
26
Missouri
13.7%
27
Illinois
13.1%
28
New Jersey
13.1%
28Kentucky
13.9%
23
Tennessee
13.9%
24
Washington
13.9%
25
Missouri
13.6%
26
Alabama
13.3%
27
Illinois
12.8%
28
New Jersey
12.7%
29
Kansas
12.6%
30
Virginia
12.5%
31
Ohio
11.95%
32
South Dakota
11.9%
325%
33
Michigan
11.84%
34
Nebraska
11.43%
35
New York
11.4%
35
Rhode Island
10.8%
37
Maine
10.7%
38
New Hampshire
10.5%
39
Maryland
10.4%
40
Pennsylvania
10.1%
41
North Dakota
9.8%
42
X
Delaware
9.4%
43
X
Wisconsin
9.0%
44
X
Iowa
8.9%
45
X
Connecticut
8.8%
46
Minnesota
8.8%
46
Hawaii
7.1%
48
District of Columbia
6.9%
49
Vermont
6.6%
50
Massachusetts
4.3%
51
Rhode Island
11.1%
36
New York
10.9%
37
New Hampshire
10.6%
38
Maryland
10.3%
39
Maine
10.2%
40
North Dakota
10.0%
41
Pennsylvania
9.8%
42
Connecticut
9.1%
43
Wisconsin
9.0%
44
X
Delaware
8.8%
45
X
Iowa
8.4%
46
X
Minnesota
8.0%
47
X
Hawaii
6.9%
48
Vermont
6.5%
49
District of Columbia
5.9%
50
Massachusetts
3.9%
51
State
Low DSH State
X
X
X
Source: U.S. Census Bureau, American Community Survey, 20112012 1-year estimates; Department of Health and
Human Services,
“Medicaid Program: Disproportionate Share Hospital Allotments and Institutions for Mental Diseases
Diseases Disproportionate Share Hospital Limits for FYs 2010, 2011FY2012, and Preliminary FY 2012FY2013 Disproportionate Share
Hospital Allotments and Limits,” 7778 Federal Register 4330145217, July 24, 201226, 2013.
Note: DSH = Disproportionate Share Hospital.
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Appendix C. IMD DSH Limits
Under Sections 1923(h) of the Social Security Act, states cannot collect Medicaid federal
matching funds for DSH payments to IMDs and other mental health facilities that are in excess of
state-specific aggregate limits. The aggregate limit for each state is the lesser of a state’s FY1995
DSH expenditures to IMDs and other mental health facilities or the amount equal to the product
of a state’s current year DSH allotment and the applicable percentage (i.e., the percentage of
FY1995 DSH expenditures paid to IMDs and other mental health facilities with a maximum of
33%). Table C-1 shows states’ preliminaryfinal IMD DSH limits for FY2012 and preliminary limits for
FY2013.
Table C-1. States’ Preliminary IMD DSH Limits
FY2012
State
IMD DSH Limit
Alabama
$3,054,805
Alaska
$6,883,889
Arizona
$19,163,608
Arkansas
$579,363
California
$777,960
Colorado
$297,388
Connecticut
$52,786,863
Delaware
$3,059,506
District of Columbia
$4,581,595
Florida
$67,589,520
Georgia
$0
Hawaii
$0
Idaho
$0
Illinois
$44,704,138
Indiana
$72,236,300
Iowa
$0
Kansas
$13,940,339
Kentucky
$26,651,979
Louisiana
$80,310,122
Maine
$35,484,498
Maryland
$25,768,504
Massachusetts
$52,817,527
Michigan
$89,556,114
Minnesota
$2,628,607
Mississippi
$0
Missouri
$131,490,365
Montana
$0
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State
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
IMD DSH Limit
$1,025,941
$0
$47,376,974
$178,685,231
$176,720
$302,500,000
$99,694,542
$547,617
$59,937,114
$2,090,951
$12,566,330
Pennsylvania
$189,673,090
Rhode Island
$1,249,751
South Carolina
South Dakota
Tennessee
Texas
Utah
$50,626,422
$444,243
$0
$170,301,413
$663,463
Vermont
$5,223,253
Virginia
$3,885,134
Washington
$62,520,306
West Virginia
$13,715,772
Wisconsin
$2,719,014
Wyoming
$0
Total
$1,939,986,271 and FY2013
State
FY2012 Final Limits
FY2013 Preliminary
Limits
Alabama
$3,054,805
$3,050,798
Alaska
$6,897,334
$7,062,870
Arizona
$19,163,608
$18,702,314
Arkansas
$579,363
$574,939
California
$777,960
$777,960
Colorado
$297,388
$297,388
$52,786,863
$52,786,863
Delaware
$3,056,482
$3,139,053
District of Columbia
$4,581,595
$4,581,595
$67,721,531
$69,346,847
Georgia
$0
$0
Hawaii
$0
$0
Idaho
$0
$0
Illinois
$44,704,138
$44,704,138
Indiana
$72,377,386
$74,114,444
$0
$0
Kansas
$13,967,566
$14,302,787
Kentucky
$26,651,979
$26,416,088
Louisiana
$80,310,122
$80,310,122
Maine
$35,553,804
$36,407,095
Maryland
$25,818,834
$26,438,486
Massachusetts
$52,817,527
$52,817,527
Michigan
$89,731,028
$91,884,573
Minnesota
$2,628,607
$2,628,607
Mississippi
$0
$0
Connecticut
Florida
Iowa
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Medicaid Disproportionate Share Hospital Payments
State
FY2012 Final Limits
FY2013 Preliminary
Limits
Missouri
$131,490,365
$127,179,885
Montana
$0
$0
$1,025,941
$1,010,002
$0
$0
$47,376,974
$47,376,974
$178,685,231
$178,685,231
$176,720
$175,981
$302,500,000
$302,500,000
$99,889,258
$102,286,600
$547,617
$516,677
$59,937,114
$59,404,548
$2,090,951
$2,094,879
$12,566,330
$12,472,447
Pennsylvania
$190,043,546
$194,604,591
Rhode Island
$1,249,751
$1,229,129
$50,626,422
$50,763,367
$444,243
$422,155
$0
$0
$170,301,413
$173,460,560
$663,463
$650,565
Vermont
$5,223,253
$5,083,555
Virginia
$3,885,134
$3,885,134
Washington
$62,642,416
$64,145,834
West Virginia
$13,715,772
$13,606,227
Wisconsin
$2,719,014
$2,683,527
Wyoming
$0
$0
$1,941,278,848
$1,954,582,362
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
South Carolina
South Dakota
Tennessee
Texas
Utah
Total
Source: Department of Health and Human Services, “Medicaid Program: Disproportionate Share Hospital
Allotments and Institutions for Mental Diseases Disproportionate Share Hospital Limits for FYs 2010, 2011FY2012, and
Preliminary FY 2012FY2013 Disproportionate Share Hospital Allotments and Limits,” 7778 Federal Register 4330145217, July 24,
201226,
2013.
Notes: DSH = Disproportionate Share Hospital. IMD = Institutions for Mental Diseases.
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Appendix D. State-by-State DSH Expenditures
There is significant variation from state to state with respect to DSH expenditures. Two distinct
differences are (1) the proportion of DSH payments going to hospitals and IMDs and (2) total
DSH payments as a percent of total Medicaid medical assistance expenditures (i.e., including
federal and state expenditures and excluding expenditures for administrative activities).
Nationally, 83% of Medicaid DSH expenditures are allocated to hospitals, and the remaining 17%
is distributed to IMDs and other mental health facilities. This distribution varies by state. As
shown in Table D-1, in FY2011, most states targeted their DSH expenditures to hospitals with 15
states allocating all of their DSH expenditures to hospitals. However, some states focused their
DSH expenditures on IMDs and other mental health facilities. Three states (South Dakota, Maine,
and Delaware) used all of their DSH expenditures for IMDs and other mental health facilities.
Table D-1 also shows FY2011 total DSH expenditures (i.e., including both federal and state
expenditures) as a percentage of total Medicaid medical assistance expenditures (i.e., including
federal and state expenditures and excluding expenditures for administrative activities). DSH
expenditures made in FY2011 ranged from 0.1% of total Medicaid medical assistance
expenditures in South Dakota and Wyoming to 12.1% in New Jersey.
Table D-1. DSH Expenditures by Type and DSH Expenditures as a Percentage of
Medical Assistance Expenditures
FY2011
($ in millions)
DSH Expenditures
State
Alabama
Hospital
Alabama
IMD
Total
Total
Medical
Assistance
DSH
Payments as a
Percentage of
Medical
Assistance
Expenditures
$445.8
$3.3
$449.1
$4,793.2
9.4%
2.6
12.6
15.2
1,290.5
1.2%
Arizona
137.3
28.5
165.8
8,988.4
1.8%
Arkansas
61.2
0.8
62.0
3,951.8
1.6%
California
2,274.9
0.3
2,275.3
54,305.8
4.2%
Colorado
185.0
0.0
185.0
4,349.0
4.3%
98.1
103.3
201.4
5,812.4
3.5%
0.0
5.6
5.6
1,391.7
0.4%
66.2
7.1
73.3
2,129.5
3.4%
Florida
241.2
108.9
350.1
18,127.9
1.9%
Georgia
410.1
0.0
410.1
8,064.6
5.1%
Hawaii
20.0
0.0
20.0
1,523.9
1.3%
Idaho
24.7
0.0
24.7
1,514.7
1.6%
Illinois
334.2
75.7
409.8
12,836.0
3.2%
Alaska
Connecticut
Delaware
District of Columbia
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DSH Expenditures
State
Indiana
Hospital
Indiana
IMD
Total
Total
Medical
Assistance
DSH
Payments as a
Percentage of
Medical
Assistance
Expenditures
223.9
102.8
326.7
6,566.4
5.0%
Iowa
81.9
0.0
81.9
3,317.1
2.5%
Kansas
46.8
23.1
69.9
2,669.2
2.6%
Kentucky
165.4
37.4
202.8
5,652.1
3.6%
Louisiana
501.0
99.2
600.2
6,297.5
9.5%
0.0
51.5
51.5
2,356.2
2.2%
38.0
50.4
88.4
7,319.5
1.2%
0.0
0.0
0.0
13,007.4
0.0%
326.8
61.1
387.9
12,062.9
3.2%
Minnesota
89.3
0.1
89.4
8,271.2
1.1%
Mississippi
204.1
0.0
204.1
4,410.8
4.6%
Missouri
528.2
171.4
699.6
8,011.2
8.7%
Montana
17.0
0.0
17.0
954.5
1.8%
Nebraska
38.5
0.0
38.5
1,637.3
2.4%
Nevada
88.4
0.0
88.4
1,562.9
5.7%
New Hampshire
121.1
27.5
148.6
1,348.2
11.0%
New Jersey
912.5
357.4
1,269.9
10,501.1
12.1%
New Mexico
28.9
0.3
29.1
3,317.6
0.9%
2,606.7
551.5
3,158.2
51,711.7
6.1%
258.5
150.5
408.9
10,297.1
4.0%
0.8
1.0
1.8
701.9
0.3%
569.5
93.4
662.9
15,533.3
4.3%
Oklahoma
40.7
3.3
44.0
4,008.3
1.1%
Oregon
32.9
20.0
52.9
4,386.3
1.2%
Pennsylvania
571.4
297.9
869.3
20,395.0
4.3%
Rhode Island
122.7
0.0
122.7
2,098.7
5.8%
South Carolina
474.6
56.1
530.7
4,930.8
10.8%
0.0
0.5
0.5
750.2
0.1%
139.2
0.0
139.2
7,970.0
1.7%
1,286.6
292.5
1,579.1
27,847.4
5.7%
Utah
24.0
0.0
24.0
1,733.3
1.4%
Vermont
37.4
0.0
37.4
1,281.9
2.9%
Virginia
189.4
5.9
195.3
6,893.8
2.8%
Washington
226.7
122.1
348.9
7,335.0
4.8%
Maine
Maryland
Massachusetts
Michigan
New York
North Carolina
North Dakota
Ohio
South Dakota
Tennessee
Texas
Congressional Research Service
45
Medicaid Disproportionate Share Hospital Payments
DSH Expenditures
State
Hospital
West Virginia
IMD
Total
Total
Medical
Assistance
DSH
Payments as a
Percentage of
Medical
Assistance
Expenditures
54.4
18.9
73.3
2,740.2
2.7%
Wisconsin
0.1
0.0
0.1
6,878.4
0.0%
Wyoming
0.8
0.0
0.8
527.2
0.1%
$14,349.6
$2,941.7
$17,291.3
$408,148.0
4.2%
Total
Source: CRS calculation using Centers for Medicare & Medicaid Services’ Form CMS-64 Data for FY2011.
Notes: Medicaid medical assistance expenditures exclude administrative expenditures. FY2011 is the most
recent data available.
DSH = Disproportionate Share Hospital. IMD = Institutions for Mental Diseases.
a.
Massachusetts does not have DSH expenditures because Massachusetts’ Section 1115 waiver allows the
state to use its DSH allotment to fund the state’s Health Safety Net, which is used to offset uncompensated
care hospital costs, to pay for designated state health programs, and to subsidize premiums for
Commonwealth Care (a program that provides sliding-scale premium subsidies for private health plan
coverage for uninsured persons at or below 300% of the federal poverty level).
Author Contact Information
Alison Mitchell
Analyst in Health Care Financing
amitchell@crs.loc.gov, 7-0152
Congressional Research Service
46