Democrats target hospitals in states that don’t want to expand Medicaid by cutting DSH

House Democrats are taking a new approach to persuade recalcitrant conservative states to extend Medicaid to low-income adults: by threatening to cut funding for hospitals. According to an updated version of a domestic policy package that the House of Representatives may consider this week, hospitals in states that do not expand Medicaid may face a 12.5% ​​cut in funding for hospitals serving large numbers of Medicaid patients.

These so-called disproportionate shares of hospital payments are designed to keep social safety nets financially stable by offsetting low Medicaid rates and helping to cover uncompensated health care costs.

Democrats have already tried to persuade states to expand Medicaid with the promise of additional federal funds through the COVID-19 relief bill passed this year. No state took advantage of this offer. This is in addition to the fact that the federal government has already covered 90% of the cost of expanding Medicaid under the Affordable Care Act.

House Democrats argue that other provisions of the law aimed at providing heavily subsidized private health insurance to low-income adults in states that do not expand opportunities for expansion obviate the need for higher DSH payments because fewer people in those states will be uninsured.

The bill would offer tax breaks in exchange for health insurance to people who would qualify for Extended Medicaid if available in their states, but this financial aid would only be in accounting until 2025, while DSH benefits are not have a validity period.

The American Hospital Association estimates that this policy will deprive the hospital of about $ 8 billion over 10 years.

Industry lobbyists say the proposed DSH is unjustly downsizing hospitals, many of which have been pushing state leaders to expand Medicaid for more than a decade. The cuts in this funding will affect hospitals in Alabama, Florida, Georgia, Kansas, Mississippi, North Carolina, South Carolina, South Dakota, Tennessee, Texas, Wisconsin, and Wyoming, which have been the latest opponents of Medicaid expansion.

“This will cause serious damage to hospitals and social care providers in the hopes of forcing states to move to expand Medicaid,” said Lisa Smith, vice president of advocacy and public policy for the US Catholic Health Association. “We have been at the forefront of many states in pushing for an expansion of the Medicaid program, so it’s not because of a lack of effort on our part. This is unfortunately state policy, ”she said.

Republican leaders in a dozen states that are not expanding their territory have stubbornly refused to consider adopting this policy. This was the case in Idaho, Maine, Missouri, Nebraska, Oklahoma and Maine, until voters in those states decided to expand Medicaid through a vote. Hospitals in these states have not experienced similar DSH cuts.

“I think the hospitals have legitimate claims here. It unfairly punishes hospitals in the rest of the states that do not expand capacity, ”said Sean Gremminger, director of policy at Purchaser Group on Health and former US Essential Hospitals lobbyist.

If subsidies are not renewed after 2025, lobbyists say, hospitals with social safety nets will be in an even worse position, with populations returning to no health coverage and institutions in non-expanding states receiving less funding to account for grants. … …

Democrats were “very concerned about health equity, and I think this will make it much more difficult for health care providers who treat the populations we want to help,” said Barbara Eiman, Washington-based advisor to American General Hospitals.

If the state decides to accept the Medicaid expansion after the DSH cut takes effect, the federal government will return to funding in full, a spokesman for the House Energy and Commerce Committee said.

Hospital lobbyists dispute the argument that more covered people in states that are not expanding will make up for DSH’s lost money.

“We have no guarantee that people will be enrolled. We do not have coverage data. We just have confidence in the cut, ”said Stacy Hughes, executive vice president of the AHA.

The Medicaid and CHIP Payments and Access Commission, a non-partisan commission advising Congress, reported this year that income from patient care in hospitals eligible for DSH care was negative before and after DSH payments.

However, the report also found that the total DSH hospital margin, which includes income not directly related to patient care such as investment income, government and local subsidies, was 2.5% before DSH payments and 5.9% thereafter. payments.

Other cuts in DSH payments from ACA are due to take effect in 2024. The bill’s author had expected that expanding ACA coverage would lead to a decrease in grants, but hospitals successfully pushed Congress to delay implementation.

The federal government spent $ 11 billion on DSH payments in 2019, according to MACPAC.

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