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Senate delays $4B in Medicaid cuts to disproportionate share hospitals

The U.S. Senate approved the delay of $4 billion in Medicaid payment cuts for disproportionate share hospitals, pushing the start date back from Oct. 1 to Nov. 22.

The delay was a provision of the continuing resolution the Senate passed Sept. 26 to avoid a government shutdown. The move came just three days after the Centers for Medicare and Medicaid Services finalized the Oct. 1 start date.

In the Sept. 23 finalized rule, CMS outlined a total of $44 billion in Medicaid payment cuts for disproportionate share hospitals to take place over the next six fiscal years, beginning with a $4 billion cut in fiscal year 2020.

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Medicaid is the dual state and federally run health insurance program for people with low incomes, a wide population including children and the elderly. Disproportionate share hospitals are a specific type of facility that serves a high volume of patients who are uninsured or who have coverage through Medicaid, which can lead to a large amount of uncompensated care.

In order to make up for uncompensated care costs, Medicaid provides hospitals with supplemental payments. The disproportionate share hospital model is a single capped fund. Medicaid gives states a specific allotment amount, and states then provide money to hospitals that qualify for the funding to cover the uncompensated costs. Allotments vary between both states and hospitals.

The $44 billion in cuts were first outlined in the Affordable Care Act under the expectation that uninsured rates and uncompensated care costs would drop. The cuts were scheduled to take effect in fiscal year 2014, but Congress has delayed them multiple times.

A national hospital representative praised the delay and called on the Senate to permanently suspend the cuts, saying that they hurt hospitals that depend on the payments.

"The trajectory of the cuts — $44 billion over six years — simply would be unsustainable for essential hospitals, which already operate with no or narrow margins and high levels of uncompensated care," Bruce Siegel, president and CEO of America's Essential Hospitals said in a Sept. 26 statement.

A congressional Medicaid adviser recommended in March that Congress slow down the cuts to mitigate the impact on hospitals.

Congress could choose to further delay the cuts. Legislation currently sits before the House Energy and Commerce Committee that proposes for the payment reductions to begin in 2022 and go through fiscal year 2025. The committee is also considering reducing the 2022 cut from $8 billion to $4 billion, according to America's Essential Hospitals.