Hospitals can expect $2B less in DSH payments for 2018

Amid the uncertainty of Medicaid expansion and the Affordable Care Act, the Centers for Medicare and Medicaid Services is moving forward to cut $43 billion in state Disproportionate Share Hospital funding starting in 2018.

The reduction in DSH payments are in place due to the anticipated decrease in the number of uninsured Americans and lower levels of hospital uncompensated care, owing to the ACA insuring more people.

[Also: CMS issues DSH final rule]

By law, $43 billion in Medicaid DHS funding will be cut through 2025, according to the proposal published in the Federal Register today.

In 2018, $2 billion would be cut. That amount increases by $1 billion each year through 2024, so that in year 2019, $ billion would be cut, and by 2025, DHS payments would be reduced by $8 billion.

CMS said it had no figures on how this would impact hospitals.

"We anticipate that the final rule would affect certain providers through the reduction of state DSH payments," said CMS Administrator Seema Verma and Health and Human Services Secretary Tom Price in the proposed rule. "We cannot, however, estimate the impact on individual providers or groups of providers."

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The Medicaid funds go to states to give to hospitals that serve a disproportionate share of low income patients and have high uncompensated care costs.

The rule incentivizes states to give the  largest percent reductions to hospitals that have the lowest percentage of uninsured individuals. However, CMS said the management of the reduced allotments still largely remains with the states.

"We anticipate, effective for FY 2018, that the proposed DSH allotment reductions would have a direct effect on the ability for some or all states to maintain statewide Medicaid DSH payments at 2017 levels," CMS said.

CMS will accept comments on the proposed rule until August 28.

Twitter: @SusanJMorse