Medicaid DSH payment cuts proposed

Posted on: 8/9/17 

The Centers for Medicare & Medicaid Services (CMS) proposed a rule on July 28 to implement cuts in Medicaid Disproportionate Share Hospital (DSH) payments, as required by the Affordable Care Act.  

States make Medicaid DSH payments to hospitals that provide a high level of Medicaid and uncompensated (uninsured) care. The federal government sets DSH allotment amounts, which are the limit to federal matching funds, for each state. These allotments normally increase each year by an inflationary amount. The ACA reduced future Medicaid DSH allotments to states in anticipation of lower uninsured rates, and lower levels of hospital uncompensated care.  

Oklahoma’s Medicaid DSH payments will likely escape reduction under this proposed rule, as the state does not use all of its federal DSH allotment, and ours would be cut less than most states’ DSH allotments.

Originally scheduled to begin in 2014, the Medicaid DSH cuts were postponed by Congress and are now to begin at the start of federal Fiscal Year (FY) 2018, on Oct. 1, 2017. The Medicaid DSH cuts are to total $2 billion nationally in FY 2018, and the cuts increase by $1 billion annually in each of the next few years. These cuts will reach $8 billion annually for FYs 2024 and 2025, and will add up to $43 billion by the end of FY 2025.  

Oklahoma is classified as one of 17 Medicaid “low DSH” states. The ACA specified that Medicaid DSH cuts will be less severe for these states, and for states with high uninsured rates.

Oklahoma does not claim its full Medicaid DSH allotment, and as a result will be insulated from the DSH cuts. Like other Medicaid spending, federal matching requires state dollars. For FY 2017, the Oklahoma Health Care Authority (OHCA) is drawing down just $26.4 million of the $39.7 million annual federal Medicaid DSH allotment for Oklahoma. Getting more of this federal allotment would require more state funding.

CMS projects a FY 2018 allotment cut for Oklahoma of $2.5 million under the proposed rule, reducing the state allotment from $39.7 to $37.2 million, which is still far more than the $26.4 million claimed by Oklahoma’s DSH program.

If CMS finalizes this method for Medicaid DSH cuts, we project Oklahoma’s DSH allotment cut will reach $10 million by FY 2024. But unless additional state funding is made available to the program, the state will still be claiming less than the reduced allotment for that year. (Rick Snyder)