A Devil In the Details

WaPo’s indispensable health reporter Sarah Kliff notes an item buried in the Obama budget that a lot of people will miss: the administration is proposing to delay $500 million in Medicaid savings that were included in the Affordable Care Act via the elimination of the venerable and much-criticized Disproportionate Share Hospital program. DSH (pronounced “Dish”) payments have long been a big bone of contention between the states and budget-conscious feds; designed to offset the cost to hospitals of uncompensated care, the program has, critics claimed, been gamed by the states to boost their Medicaid money from Washington. So when the program was deemed unnecessary by the designers of Obamacare, nobody much took notice. But now the landscape has changed:

At first, the health law appeared to make DSH payments unnecessary. When the Affordable Care Act expanded Medicaid to 17 million Americans, it would significantly reduce the burden of unpaid bills on health-care providers.

The Supreme Court decision, however, changed the equation. It allowed states to opt out of the Medicaid expansion. Many Republican governors now say they won’t move forward on that program, which means that a lot of the unpaid bills will still exist. And that left hospitals clamoring for these DSH cuts to be reversed so they could continue covering the uncompensated care they provide.

The White House budget essentially proposes something close to that: not reversing the DSH cuts, but delaying their implementation for one year.

At this point, the administration seems to have decided the leverage provided by the withdrawal of DSH funds isn’t going to make a big difference in the future decisions of the “holdout states” who are resisting the Medicaid expansion, so why punish the victims (the uninsured and hospitals in those states)?

It’s unclear whether this action will require legislation or can be implemented administratively. If it does require action in Congress, it will be a good test of GOP unwillingness to cooperate in “fixing” Obamacare. After all, the main beneficiaries will be the states whose governors and legislators are shouting “hell, no!”

Ed Kilgore

Ed Kilgore, a Monthly contributing editor, is a columnist for the Daily Intelligencer, New York magazine’s politics blog, and the managing editor for the Democratic Strategist.