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A viable safety net depends heavily on hospitals. In addition to providing inpatient services, their emergency rooms deliver vast amounts of ambulatory care to low-income Americans. Not all hospitals are, of course, equal in this regard. Of the more than 5,700 hospitals in the United States, a much smaller number have been front and center in caring for the disadvantaged. These so-called safety-net hospitals face chronic fiscal stress brought on by serving large numbers of uninsured. Three decades ago, federal policymakers responded to this problem by taking steps to shore up funding for these institutions. Specifically, the Omnibus Budget Reconciliation Act of 1981 authorized state Medicaid programs to take into account the fiscal plight of hospitals that treat greater percentages of low-income individuals who are uninsured or enrolled in Medicaid. The legislation authorized states to provide disproportionate share hospital (DSH) payments to these institutions. Through different mechanisms, Congress also required Medicare to allocate DSH funds. The landmark health care reform of March 2010 promises to reshape and curtail Medicaid DSH. In crafting the DSH portions of the Patient Protection and Affordable Care Act (ACA), two general perspectives animated federal policymakers. First, they fathomed that the states had historically used DSH as a platform for creative financing schemes to shift costs from themselves to the federal government. A highly technical intergovernmental politics of accounting had grown up around DSH, which left many federal officials with a jaundiced view of state behavior. Second, federal officials reasoned that the expansion of insurance coverage meant that safety-net hospitals would provide less charity care and that DSH would become less central to their fiscal Safety-Net Hospitals at the Crossroads Whither Medicaid DSH? Chapter 7 153 Michael K. Gusmano and Frank J. Thompson solvency. Hence, the ACA calls for $18 billion in Medicaid DSH cuts through 2020.1 It also pares Medicare DSH payments by $22 billion. The ACA left many safety-net hospitals concerned about their future. During the health care debate in 2009, their advocates warned against the cuts in Medicaid DSH that the White House had negotiated with the American Hospital Association. While safety-net providers generally supported health care reform, they feared that reductions in DSH payments would erode their viability. The implications of the DSH modifications for the safety net will largely depend on the politics that unfolds over the next several years. The issue here involves the durability of the health reform legislation. Will the new law unleash positive feedback that entrenches it in the American health insurance regime? Or will subsequent elections and related political eddies create circumstances where federal policymakers repeal or otherwise vitiate it (Patashnik 2008)? If so, will the Medicaid provisions in general and its DSH components in particular survive? Beyond these large political questions, the unfolding story of DSH and the safety net will hinge substantially on the politics of the budgetary process and policy implementation. If safety-net hospitals face mounting fiscal woes, they may well strive to derail the DSH cuts envisioned in the new law. However, any such effort will unfold in a very difficult fiscal environment. With the federal deficit and debt exploding, the call for entitlement reform and further cuts may well gain steam. Beyond the budget process, discretion wielded during implementation by the federal and state governments will markedly shape which safety-net institutions get what, when, and how from DSH and Medicaid more generally. Executive branch politics will be pivotal. We possess no crystal ball that enables us to predict DSH policy developments . But we can provide the provenance for insight by assessing the evolution of Medicaid DSH policy over nearly three decades as well as the challenges presented by health reform. This chapter opens with a review of DSH’s transformation since its birth in 1981. The first decade of the initiative proved pivotal in forging a template for the program that became very difficult to revamp. DSH provides a particularly vivid example of what social scientists call path dependence. The chapter then turns to the issue of targeting— whether DSH monies flow to the most essential safety-net hospitals in greatest fiscal need. It opens by examining the variation in DSH spending among the states; it then considers targeting within their boundaries. We briefly compare the level of targeting achieved by Medicaid DSH to that fostered by Medicare. Having assessed the evolution of Medicaid DSH through the G. W. Bush administration...


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MARC Record
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