The New Medicaid Expansion Opt-In and Disproportionate Share Hospitals

Inside baseball — inside the fairly insular world of hospital finance — one of the most widely discussed ACA provisions has always been the re-invention of the treatment of disproportionate share hospitals (DSH) under the ACA.  Often referred to as the end of DSH, the ACA might more accurately be described as an attempt to re-invent DSH.  Of course, the Supreme Court's re-invention of the ACA's Medicaid expansion provisions  has highlighted the way this re-invention of DSH was supposed to be executed.

What is DSH?  Well, there are really two flavors of DSH: Medicaid DSH and Medicare DSH. Generally, DSH  is a system of Medicaid and Medicare triggered payment adjustments, designed to offer federal funds to partially offset the high cost of being a hospital that disproportionately serves the uninsured, the underinsured, and the low income.  Pegged to Medicaid eligbility, Medicaid DSH payments always bore the mark of that program: incredibly uneven geographic distribution. 

Under the ACA's planned federalization of Medicaid's eligibility standards, this was to stop.  DSH payments were to be drastically cut back under the ACA, producing a considerable amount of anxiety in hospital circles everywhere but particularly in states considering opting out of the ACA Medicaid expansion.

Why the fear?  The federalization of Medicaid was specifically struck down in NFIB v. Sebelius.  Even if you are among the camp that thinks a majority of states will eventually opt-in to Medicaid expansion (as am I), you may not think this will necessarily be speedy or pretty. In the meantime, the squeeze will already be on Medicaid DSH payments.

So, hospital administrators in Kansas and Missouri must be afraid. Very afraid. 

Medicaid’s Widely Variable Income Cutoff

It is not widely enough discussed that it is possible to have an income below the federal poverty line and still not qualify for Medicaid.  It is a legacy of the peculiarly federal-state shared authority for Medicaid that we have — to repeat the truism — fifty different Medicaids. 

But what really ought to impress is just how different those fifty different Medicaids can be.  New Jersey, for instance, will provide Medicaid eligibility for parents with incomes at the federal poverty level  (about $18,500 for a family of three in 2011) while Missouri will only reach parents with incomes at about 18% of the FPL. (MO actually bases its eligibility on 1986 AFDC eligibility guidelines but I standardize the numbers to the FPL for comparison purposes, though the lack of a standardized eligibility measure should be telling in and of itself.)

After the Supreme Court's ruling on the Affordable Care Act, we may  not see the standarization of Medicaid eligibility the statute contemplated. This is more than an interesting historical disquisition if states choose not to opt-in to the ACA's Medicaid expansion. 

In fact, disparate treatment of low income Americans could only be increased by less than complete opt-in to Medicaid expansion. This disparate treatment, long the hallmark of Medicaid, may actually penetrate public consciousness in metropolitan areas, like Kansas City, where ACA expanded Medicaid may be available in one part of the city but not in the other. And this makes me curious about interstate migration and housing patterns as they relate to health insurance. We should all be curious.

Video: SCOTUS ACA Health Care Decision Panel


From left to right: John Ellwood, Jesse Choper, Steve Shortell, Brad DeLong, Ann O’Leary, and Ann Marie Marciarille:

SCOTUS Rules, Cal Responds: UC Berkeley Experts Assess Impacts of the Supreme Court’s Landmark Decision on the Affordable Care Act – UCTV – University of California Television: UC Berkeley convenes panel of experts to analyze the impacts of the Supreme Court’s decision to uphold the Affordable Care Act, or “Obamacare.” Professors of law, economics, and public health look at what the decision means for future health reform, constitutional law, medical care, health insurance, public policy and politics.

John Ellwood: 00:55
Jesse Choper: 15:00
Steve Shortell: 30:30
Brad DeLong: 45:50
Ann O’Leary: 55:30
Ann Marie Marciarille: 1:07:33
General Questions: 1:19:40