America's Hospitals: In Danger or Bouncing Back?

Slide Presentation by Terri Coughlin, M.P.H.

On November 20, 2002, Terri Coughlin, M.P.H., made a presentation in a Web-assisted teleconference at Event 2, which was entitled "Hospital Uncompensated Care Issues."

This is the text version of Ms. Coughlin's slide presentation. Select to access the PowerPoint® slides (183 KB).

Hospital Uncompensated Care Issues

Terri Coughlin, M.P.H.
Senior Research Associate
The Urban Institute

Slide 1

Background and Purpose of Medicaid DSH Program

• In 1981 Congress mandated Medicaid DSH payments.
• $15 billion spent on DSH payments in 2001.
• Purpose:
  • Maintain access for low-income.
  • Provide financial help to hospitals serving large numbers of low-income patients.
• Single biggest public program to help hospitals cover UC costs.

Slide 2

How Does a DSH Program Work?

• Each state is different.
• States largely determine design.
  • Which hospitals get DSH.
  • Allocation among hospitals.
  • DSH payment methodology.
  • Number of DSH programs.
• Federal DSH spending is capped.
  • States have preset federal DSH allotments.

Slide 3

DSH Payments to Hospitals

• Nationally, 80% go to acute care hospitals, with most going to county-owned or private hospitals.
• 20% to mental hospitals.
• Distribution varies by state.

Slide 4

Key Issues in DSH Program

• Highly controversial issue between federal government and states.
  • How states raise their share of DSH payments.
  • What share of DSH payments stick with hospitals.
  • Distribution of federal DSH dollars across states.
  • Several federal DSH reforms in 1990s.
• Sometimes controversial issue within a state.
  • Among hospitals.
  • Between state and hospitals.

Slide 5

Steps That States Can Take To Make Best Use of DSH Funding

• Ensure state is spending its federal allotment.
• Ensure "true" safety net providers receive enough DSH payments.
  • Change DSH eligibility or allocation formulas.
• Impose conditions on hospitals getting DSH.
  • E.g. must provide certain amount of free care or primary care.
• Encourage hospital innovation.
  • CO, IN, MI and TX use DSH to fund "insurance-like" programs for uninsured.

Slide 6

New Federal DSH Provisions

• In 2003 cutbacks in federal DSH spending.
  • More than $1 billion; affect 35 states.
• In 2003 hospital-specific cap is expanded.
  • States can pay public hospitals 150% of UC costs, rather than usual 100%.
• Implications.
  • Less money for UC.
  • Better targeting of DSH funds with 150% option.

Slide 7

Possible Federal Medicaid DSH Reforms

• Make it more akin to Medicare DSH.
• Reallocate federal share of DSH.
  • National formula for state distribution.
  • Distribution on state need (e.g. number of low-income persons) and fiscal capacity.
  • National formula for hospital allocation.

Slide 8

Strategies to Help Prevent UC costs

• Promote insurance initiatives—Medicaid, SCHIP, HIFA waiver, ESI.
• Encourage use of primary care.
  • Expand network of community health centers (RHCs, FQHCs).

Slide 9

Other Ways to Help Pay for Hospital UC

• Medicaid
  • Increase general Medicaid reimbursement.
  • Medicaid upper payment limit (UPL) strategies.
• Increase state/local hospital subsidies.

Slide 10

Major Differences Between Medicare DSH and Medicaid DSH

• Size: Medicaid DSH 3 times larger than Medicare ($15 billion versus $5 billion).
• Federal funding: Limited for Medicaid; no limits for Medicare.
• Formula: Medicaid no national formula; national for Medicare.
• State role: Large for Medicaid; virtually no state role in Medicare.

Current as of June 2003

Internet Citation:

Hospital Uncompensated Care Issues. Slide Presentation by Teresa Coughlin, at Web-Assisted Teleconference, "America's Hospitals: In Danger or Bouncing Back?" Agency for Healthcare Research and Quality, Rockville, MD. http://www.ahrq.gov/news/ulp/hospital/coughlintxt.htm

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