Senate removes DSH cuts from Build Back Better Act after hospital pushback

After fierce pushback from hospitals, the Senate’s version of President Joe Biden’s $1.7 trillion social spending package excludes the House’s cuts to Medicaid disproportionate share hospital payments.

The House-passed Build Back Better Act would cut Medicaid DSH payments by 12.5% to hospitals operating in the 12 states that have not expanded Medicaid under the the Affordable Care Act. House Democrats justified these cuts because the bill also would provide subsidized private health insurance from the exchanges to those who would qualify for Medicaid had their home states broadened program eligibility, thereby reducing the need for DSH funding to cover uncompensated care costs.

Hospitals protest that they are being unfairly targeted because political leaders in those states haven’t expanded coverage to low-income adults.

The argument appeared to resonate with Senate Democrats, who dropped the cuts in their version of the package, which they released last weekend. However, the Senate legislation retains House language limiting federal payments in non-expansion states for separate uncompensated care pools.

“We’re very pleased House and Senate leaders saw the harm the Medicaid DSH cuts would cause and removed them from the package,” Beth Feldpush, senior vice president of policy and advocacy for America’s Essential Hospitals, said in a statement. “But the cuts to uncompensated care pools remain a threat to hospitals, patients, and communities, and we urge lawmakers to reject those, as well.”

The Build Back Better Act would offer ACA subsidies for four years to 2.2 million people who would be eligible for Medicaid if their states expanded. The ACA only allows subsidies for those who earn at least the federal poverty level, which is $12,880 for a single person. The law intended for Medicaid to cover that population, but a Supreme Court ruling in 2012 allowed states to opt out of the expansion, leaving millions in the “Medicaid gap” without access to health coverage.

The House included the DSH cuts to nudge states to expand Medicaid and to partially offset the costs of expanding subsidy eligibility. House Democratic leaders also argue states should get less funding for uncompensated care because more people in those states would be eligible for affordable health insurance.

Experts estimate that hospitals would come out in top in the end under the House legislation, even with the DSH cuts, because more people would be covered and fewer bills would go unpaid.

But hospitals caution too few newly eligible people may sign up for subsidized health insurance, leaving providers with a high number of uninsured patients and less federal support to make up for it. Moreover, the subsidies expire after four years while the DSH cuts would be permanent.

Georgia Democratic Sens. Jon Ossoff and Raphael Warnock, whose home state is among the holdouts, led the push to get the DSH cuts removed, arguing they would harm safety net hospitals.

“Reducing federal funds to hospitals and providers can be detrimental to their survival, and in the midst of a global pandemic, we should not be imposing additional financial constraints,” Georgia’s Democratic members of Congress wrote in a letter to House and Senate leaders last month.

Senate Majority Leader Charles Schumer (D-N.Y.) has said the chamber will vote on the package before the end of the year. The House passed its version of the legislation last month.


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