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CMS releases Medicaid DSH proposed rule

May 13, 2013

The Centers for Medicare & Medicaid Services today proposed a methodology for reducing federal Medicaid Disproportionate Share Hospital allotments to states by an aggregate $500 million in fiscal year 2014 and $600 million in FY 2015 under the Patient Protection and Affordable Care Act, the amounts that were mandated in statute. The proposed rule establishes separate DSH reduction pools for “low-DSH” states and other states, then creates a formula for distributing the reductions in each pool based on five factors outlined in the law. CMS said the proposed methodology gives one-third weight to the uninsured percentage factor and one-third weight to each of the two DSH payment targeting factors; encourages states to target Medicaid DSH payments to high Medicaid volume hospitals and hospitals with high levels of uncompensated care; and contains a procedure for protecting allotments that support Section 1115 demonstration coverage increases. CMS will revisit the methodology and promulgate new rules for DSH reductions in FYs 2016 and beyond. “We continue to believe that both Medicaid and Medicare [DSH] cuts should be delayed for two years in order to better ascertain whether coverage expansions have been implemented,” said AHA Executive Vice President Rick Pollack, noting, however, that the proposed rule implementing the congressionally mandated cuts, “appears to have been accomplished in a responsible way” based upon AHA’s preliminary analysis. AHA supports the DSH Reduction Relief Act of 2013 (H.R. 1920), which would delay the cuts for two years. The proposed rule will be published in the May 15 Federal Register, with comments accepted through July 12. The final changes will take effect Oct. 1, unless Congress acts to delay the cuts.