Hospital groups decry new round of DSH cuts in latest infrastructure bill

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Democrats want to cut disproportionate share hospital payments to facilities in states that haven't expanded Medicaid, with the thinking that the payments won't be needed because an infrastructure bill will close the Medicaid coverage gap. (Getty Images)

Hospital groups are making a last-minute push to prevent Congress from including cuts to safety net hospitals in a massive $1.75 trillion infrastructure package.

A collection of eight groups wrote to Democratic congressional leaders Monday with concerns over the latest bill text for the package, which Democrats are expected to vote on in the coming weeks. The package would trigger a new round of cuts to the Disproportionate Share Hospital (DSH) program and uncompensated care as part of an effort to close the Medicaid coverage gap.

The latest bill text, released by the House late last week, would provide subsidies to residents in nonexpansion states that would qualify for coverage under the Medicaid expansion. The residents could use those subsidies to buy coverage on the Affordable Care Act’s (ACA's) insurance exchanges.

But the legislation would also cut DSH allotments to hospitals in the affected states. The DSH program gives payments to hospitals that serve many uninsured and low-income patients.

“While we appreciate the goal of increasing coverage to residents in states that did not expand their Medicaid programs … it should not come at the expense of vital funding to facilities located in those parts of the country,” the statement said.

The groups that signed onto the letter include America’s Essential Hospitals, the Association of American Medical Colleges, the American Hospital Association (AHA) and the Federation of American Hospitals.

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Democrats proposed cutting DSH payments to reflect “lower rates of uncompensated care,” according to a summary posted by House Democrats.

But hospitals charge that the cuts would continue even though the enhanced subsidies that close the Medicaid coverage gap expire after 2025.

“The cuts could be as much as $7.8 billion in federal funding over 10 years, and this reduction in funding will make it difficult for hospitals in those states to continue to serve their patients and their communities,” the letter said.

Hospital groups are experiencing a bit of déjà vu as they faced similar issues with the ACA.

The landmark healthcare law cut DSH payments to hospitals on the premise that they won’t be needed with more people having coverage thanks to the Medicaid expansion and exchanges. But hospitals have argued the payments are still vital to safety net hospitals that operate on thin margins.

The ACA DSH cut for the 2021 fiscal year was $4 billion and increases to $8 billion from 2022 through 2025, according to the AHA. But Congress got rid of the cuts for the current fiscal year and delayed the other cuts until 2024.

Now, hospital groups are worried another cliff is right around the corner with the cuts from the infrastructure bill.

“Essential hospitals still need DSH and other uncompensated care support because Medicaid doesn’t cover their costs, and uninsured and underinsured patients will remain,” said Beth Feldpush, senior vice president of policy and advocacy for America’s Essential Hospitals, in a statement. “That was our experience with the Affordable Care Act and the reason Congress has repeatedly delayed and eliminated the ACA's cuts to Medicaid DSH.”