In Chapter 3, MACPAC explores approaches for improving the targeting of DSH payments to providers. Under current law, states are permitted to make DSH payments to virtually any hospital in their state. This flexibility allows states to direct DSH payments based on local circumstances, but it leads to a wide variation in the share of hospitals that receive DSH payments in each state.
Chapter 3 analyzes the effects of the current minimum federal eligibility criteria for DSH payments from a 1 percent Medicaid utilization rate to a higher standard. The Commission examines seven different thresholds, including absolute standards that would apply equally across states and relative standards that would vary by state based on their hospitals’ average Medicaid or low-income utilization rate. However, because DSH hospitals vary so much in terms of patient mix, mission, and market characteristics, it is difficult to identify a single utilization-based standard applicable to all hospitals that represents a clear improvement over current law.
The chapter concludes with a discussion of other approaches that might be used to better target funding, such as changing the types of uncompensated care that DSH funding can subsidize. In future reports, the Commission plans to further explore policies to improve the targeting of DSH funding to states and providers.
From: March 2017 Report to Congress on Medicaid and CHIP