The Centers for Medicare and Medicaid Services finalized billions of dollars in Medicaid payment cuts for hospitals that have large amounts of uncompensated care.
CMS finalized Sept. 23 $44 billion in Medicaid payment cuts for disproportionate share hospitals, facilities that serve a high volume of uninsured or Medicaid patients, which can result in hospitals having large amounts of uncompensated care. CMS first proposed the rule in July 2017.
While the agency officially finalized the cuts, the U.S. House of Representatives chose to delay them from taking effect through Nov. 21 as part of its stopgap funding bill to avoid a government shutdown. The House passed the bill Sept. 19 and it is now before the U.S. Senate. Congress could also choose at a later date to delay the payment cuts beyond Nov. 21.
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Under CMS' finalized rule, disproportionate share hospital payments would reduce by $4 billion in fiscal year 2020, and then by $8 billion every fiscal year from 2021 to 2025. The program's funding is then expected to return to its regular rate in 2026.
Medicaid is the joint federal and state health insurance program that mainly covers people with low incomes, a wide population including children and the elderly. 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 uncompensated care costs. Allotments vary between both states and hospitals.
The payment cuts were first outlined in the Affordable Care Act because of the expectation that the uninsured rate and hospitals' uncompensated care would both drop, according to the finalized rule. The cuts were originally scheduled to take effect in fiscal year 2014; however, Congress has delayed them multiple times.
The hospital industry has pushed back against the cuts, claiming that it is going to hurt hospitals that depend on the extra payments, and a congressional Medicaid adviser recommended in March that Congress slowdown that payment cuts to lighten the impact to hospitals.
The U.S. Supreme Court blocked billions of dollars in cuts to Medicare disproportionate share hospital payments June 3, ruling 7-1 in favor of the hospital industry. Justice Brett Kavanaugh did not take part in the decision. Justice Neil Gorsuch, who wrote the decision, said the U.S. Department of Health and Human Services failed to follow rulemaking requirements by not notifying the public and seeking comment.
The cuts to Medicare payments would have totaled $3 billion to $4 billion over a period of nine years, according to the ruling.

