Federal funds allocated to states to make Medicaid disproportionate share hospital payments (Medicaid DSH) payments would be reduced beginning in FY 2018 under a new rule proposed by the Centers for Medicare & Medicaid Services.

The Medicaid DSH cuts, mandated by the Affordable Care Act but delayed several times at the behest of Congress, would come in the form of reduced Medicaid DSH allocations to individual states, with the size of those allocation cuts based on the nature of individual states’ Medicaid programs and changes in the number of uninsured patients in individual states.

The cuts were established in the Affordable Care Act based on the assumption that enhanced access to health insurance would result in hospitals serving fewer uninsured patients and therefore needing fewer Medicaid DSH resources.

The proposed regulation calls for $43 billion in savings between 2018 and 2025, a target set in the enabling legislation.

Medicaid DSH funds are absolutely essential to private safety-net hospitals because of the vital role they play in helping to underwrite the care these hospitals provide to their many low-income, uninsured, and underinsured patients.

Learn more about the CMS proposal for reducing state Medicaid DSH allocations in this article in Becker’s Hospital Review or see the draft regulation itself here.