CMS Outlines Proposed Methodology for DSH Reductions

On May 15, 2013, the Centers for Medicare & Medicaid Services (CMS) published a proposed rule  in the Federal Register that outlines the methodology for implementing the annual reductions to state Medicaid Disproportionate Share Hospital (DSH) allotments included in the Affordable Care Act (ACA, P.L. 111-148 and 111-152). ACA specified aggregate reductions for fiscal years (FYs) 2014-2020, and required the secretary of the Department of Health and Human Services (HHS) to develop a methodology, in accordance with specified factors, for reducing state allotments.

The proposed rule provides a methodology for the first two years only. CMS expects those states that do not implement the Medicaid expansion to have higher rates of uninsured (and more uncompensated care). As such, the DSH reductions in those states may be smaller compared to states that implement the Medicaid expansion. FY 2014 and FY 2015 reductions will not include information on the relative impacts that result from state decisions on the Medicaid expansion and, as a result, may mitigate the initial reductions in states that implement the Medicaid expansion. However, CMS will release another proposed rule on the methodology for determining DSH reductions for FY 2016 and beyond that accounts for the different circumstances among states.

Comments on the proposed rule must be submitted by July 12, 2013.

UPDATE: CMS issued its final rule on September 18, 2013. With the exception of minor technical changes, the final rule is identical to the proposed rule.