Analysis: How a longer-term delay to Medicaid DSH cuts may play out

• CMS issued a rule Sept. 23 finalizing the ACA’s mandated Medicaid disproportionate share hospital cuts for FY20.
• The final rule provides the allocation framework for $4 billion in DSH cuts effective Oct. 1, and more cuts to come FY21 through FY25.
• It’s possible that Sen. Chuck Grassley will attempt to address the mandated Medicaid DSH cuts in the budget package released by the Senate Finance Committee.

CMS issued a rule Sept. 23 finalizing the Affordable Care Act’s mandated, and long-delayed Medicaid disproportionate share hospital (DSH) cuts for FY20. The final rule provides the allocation framework for $4 billion in cuts effective Oct. 1, increasing to $8 billion for FY21 and subsequent years through FY25 (absent legislative intervention).

The “continuing resolution” passed by the House and Senate that funds the government through Nov. 21 includes a provision that will delay the Medicaid DSH cuts until then. The President will likely have signed the bill by the time you read this.  

Takeaway

There are rumblings that Senate Finance Committee Chair Chuck Grassley (R-Iowa) and others like Sen. Marco Rubio (R-Fla.) are interested in revising the Federal Medicaid DSH allocation formula. Both believe their state’s providers receive less than what they should relative to similarly sized states.

It’s possible that Sen. Grassley will attempt to address this in the budget package released by the Senate Finance Committee (likely in the November timeframe). Whether he and others from states with lower dollar cuts to their DSH allotments both have the numbers to demand changes to the DSH funding formula and are willing to risk letting the cuts kick in for the possibility of increasing their states’ Medicaid DSH allotment if the Medicaid DSH formula is reconfigured, is a game of chicken worth watching.