Health Care Reform

Health Care Reform

Medicare & Medicaid DSH Cuts

PEACH strongly advocated for the passage of health care reform as essential for millions of uninsured Americans to get the health insurance they need and deserve. However, the March 2010 Affordable Care Act (ACA) included some provisions that are harmful to safety net hospitals, foremost of which is the deep cuts in Medicare DSH funding that many community safety net hospitals rely on to keep their doors open.

Under the ACA, Medicare disproportionate share hospital (DSH) payments (supplemental payments made to hospitals that care for large numbers of low-income patients) will be cut by 75 percent beginning in 2014.

Community safety net hospitals rely on Medicare and Medicaid payments in order to continue serving the primarily low-income and uninsured patients in their communities. Basic Medicare and Medi-Cal payment rates are well below the actual costs of providing health care services and supplemental funding provided through the DSH programs help but still do not cover the costs of providing care to Medi-Cal and Medicare patients.

Medicare DSH payments are the lifeline for California’s private safety net hospitals – if the 2014 cuts take place, private DSH hospitals in California’s most vulnerable communities will experience unsustainable losses that will force many to close.

Even if millions gain health insurance as a result of reform, the anticipated reduction in private safety net hospitals’ charity care will not make up for the 75 percent payment reduction to these hospitals.

For more information about the negative impact of the 2014 Medicare DSH cuts see the following study:

Impact of Medicare DSH Reductions on Private Safety Net Hospitals in California

Other Health Care Reform Concerns

While many of the future policy changes under health reform are designed to improve access and the quality of care, some make considerable financial demands of hospitals.

In the coming years, the federal government will:

  • Require hospitals to spend millions on new information technology.
  • Reduce annual cost-of-living increases of Medicare payments.
  • Apply a “productivity adjustment” to Medicare payments that will effectively reduce those payments.
  • Deny Medicare payments to hospitals for patients who need to be readmitted shortly after they are discharged regardless of whether the hospital is responsible for such readmissions.
  • Require hospitals to invest millions to develop new approaches to delivering care to Medicare patients.