Dishing About DSH Redux

Earlier this month, President Obama submitted a budget proposal offering to delay the implementation of DSH cuts by twelve months. I have dished on the significance of DSH before and will merely note here that this is a proposal — a bargaining chip if you will — and that twelve months is not an extraordinarily long time in the acute care hospital budget cycle.

DSH's re-invention is inevitable, it seems to me. Forestalling the 75%  DSH cuts that bind while states move toward Medicaid expansion makes sense so long as progress is being made. Otherwise, it is hard to rationalize the continuation of such a troubled federal subsidy system.

The battle over DSH or Medicaid expansion highlights the irony, of course, that it is federal dollars that keep some acute care hospitals alive — whether those dollars come to the hospital through the back door (DSH) or through the front door (through expanded Medicaid enrolled patients). Ironically — given the gaming of DSH payments — significant numbers of rural low income facilitites would do better under the federal dollars through the front door model than the current gamed-DSH through the back door system, where the majority of dollars go to suburban hospitals in only a few regions of the country.

I tell my students there are always cross-subsidizations in health care, some of them perverse. I also tell them we can learn a great deal about health care payors and players by looking at how the cross subsidization works.  And then I talk about DSH.

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