DSH cut delay surprise in POTUS budget

Sarah Kliff notes the surprising proposal in the President’s budget to delay the scheduled cuts to Disproportionate Share (DSH) payments that Medicare makes to hospitals based on how many uninsured patients they treat. The logic of cutting them in the ACA was that the number of uninsured would decline due to private insurance purchased in exchanges and Medicaid expansions. Of course, the Supreme Court made the Medicaid expansion voluntary and a good number of states are balking. The looming DSH cuts are one of the biggest realpolitik reasons for a skeptical (or downright hostile) state to expand Medicaid. If they don’t, they are essentially voluntarily redistributing money to other states under the default ACA.

The President’s budget proposes delaying these cuts, presumably to lessen the blow on hospitals in states who would otherwise have cuts to DSH payments without reductions in the uninsured.

This is a big surprise in that it it would give away political leverage to expand coverage. Of course, everyone is saying the budget is DOA, but I think there are nuggets of a potential White House/Senate deal in the President’s budget that could result in something passing the Senate that would pressure the House to vote on it. And something has to be done to raise the debt limit.

This surprise move (at least to me) implies to me that it is part of something that has already been discussed in the nascient White House/Senate negotiations and that along with chained CPI and more means-tested Medicare being put forth by the President in his budget, this item makes me think there is a chance of a ‘mini grand bargain’ of sorts. And I would think a whole lotta Republicans would love to vote for this, as they could then say ‘see we delayed Obamacare.’ The Speaker will say lets do it now and of course the President will say no, it is part of a bigger deal only.

Bottom line, I think there is a reasonable chance that between now and Labor Day that House Republicans come to regret pushing the Senate back into “normal order” and saying they no longer wanted to deal with the President directly.

About Don Taylor
Professor of Public Policy (with appointments in Business, Nursing, Community and Family Medicine, and the Duke Clinical Research Institute), and Chair of the Academic Council at Duke University https://academiccouncil.duke.edu/ . I am one of the founding faculty of the Margolis Center for Health Policy. My research focuses on improving care for persons who are dying, and I am co-PI of a CMMI award in Community Based Palliative Care. I teach both undergrads and grad students at Duke. On twitter @donaldhtaylorjr

7 Responses to DSH cut delay surprise in POTUS budget

  1. Anon says:

    I think something else relevant to the decision may be the issue of how the DSH cuts are to be distributed among the states. See ACA section 2551 on “DSH Health Reform Methodology” – in addition to making cuts, the SHHS is required to choose a methodology for the cuts to better align payments with certain state DSH program characteristics. I surmise this may be causing some political headaches, making DC want more time to make a decision.

  2. Brad F says:

    You may be missing the most obvious reason.

    Taking the aspirin before the headache starts. The AHA has clout. The WH knows the cuts will hurt some underserved hospitals hard, and the fixes of tomorrow (of the, “I told you so, Obamacare sucks” vintage)–and they will be needed, wont go down as easy as the offered one year extension.

    Think about it. Of the holdouts, what has more worth: the political posturing, which was already going to cost big time (the pols factored the consequences into their calculous already) or one year of DSH payments. Most, not all govs in waiting, already put their nickel down.


  3. cd says:

    The proposed delay is to proposed Medicaid DSH, not Medicare DSH. They are two completely different programs. Both are cut by the ACA, but the proposed budget only delays the Medicaid cuts.

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