In a boon for safety-net hospitals, the federal government increased its allotment for “Disproportionate Share Hospitals” by an additional $268 million in 2009.
The money reached hospitals indirectly, however. Technically, the Centers for Medicare and Medicaid Services provides each state with an annual allotment for eligible hospitals that serve a disproportionate share of low-income or uninsured individuals, meant to account for higher costs associated with treating uninsured and low-income patients. The American Recovery and Reinvestment Act increased the 2009 allotment from approximately $11.06 billion to $11.33 billion.
In FY2006, the most recent data available, New York was the leading recipient among states, netting more than $3 billion in DSH payments from Medicaid (according to statehealthfacts.org). California received about $2.34 billion, while Texas, New Jersey and Pennsylvania rounded out the top five, each receiving more than $1 billion in DSH payments.
According to Paula Minnehan, vice president, Finance and Rural Hospitals for the New Hampshire Hospital Association, the ARRA funds were a useful “bump in the DSH” program.
“We believe New Hampshire is eligible to receive the bump, which will mean about $5 million more to our state in 2009,” Minnehan said. Nearly 1 in 6 Medicaid dollars that New Hampshire receives comes from DSH allotments, according to statehealthfacts.org.
Minnehan noted that not all states have DSH programs.
Her colleague, Steve Ahnen, president of the NHHA, said hospitals in New Hampshire were facing the same kinds of challenges as hospitals elsewhere.
“Investments and reserves have been challenged,” he noted. “And the cost of borrowing money has risen, there’s been a slow-down in elective procedures, and hospital executives are making tough decisions about the mix of services they can offer.”
“For some,” Ahnen added, “the problems are ever more acute based on payer mix.”
In order to tap into the additional funds, states had to prove that they used the existing FY2009 allotment for disproportionate share hospitals – and not all states have spent their full DSH allocation in past years. States were then required to request the additional funds from CMS as part of their quarterly Medicaid budget request. The ARRA funds were then distributed as separate Recovery Act DSH grants.
Critics of the federal government’s health initiatives have frequently targeted the Disproportionate Share Hospital program. In a 2008 issue brief from the Heritage Foundation, a conservative think tank, Christopher J. Meyer wrote, “The DSH program, while providing critical resources for safety-net facilities, is the subject of some controversy because some states have employed financial gimmicks.”
“For example, many states were not using actual state appropriations for their share of DSH payments, and providers were not keeping all of their DSH dollars,” Meyer noted. “Thus, the bulk of DSH spending was not being used to cover safety-net hospitals’ uncompensated care costs as Congress had intended. Instead, these schemes increased the funds available to such hospitals, leading to expansions in their programs, which resulted in more patients using their facilities. Expanding healthcare access is usually preferable, just not through the emergency department. These additional funds could have been used to subsidize private coverage or more choice-based models of Medicaid managed care.”