Analysis of the Joint Distribution of Disproportionate Share Hospital Payments. Current Distribution of DSH Payments

09/01/2002

Medicare DSH Payments. We estimate Medicare FY 1998 actual DSH payments at $4.83 billion. If the FY2003 DSH payment rules had been in effect and all other FY1998 payment parameters remained unchanged, payments would have been $358 million higher, or $5.18 billion. Consistent with the changes in the formula, most payment increases occurred among rural hospitals and small urban hospitals. Although rural hospitals provided 19% of total Medicare inpatient days, they received only 3.1% of the Medicare DSH payments. Under BIPA, the rural share of DSH payments will more than double to 7.2%.

Medicaid DSH Payments. Nationally, we found that the states reported $15 billion in DSH payments to hospitals, with about 23% of this amount paid to institutes for mental disease. The states with the largest DSH programs are California, New York, New Jersey, and Texas. Utilizing the estimates made by Coughlin et al. for FY 1997, we estimate that 11 states retained DSH funds: California, Connecticut, Georgia, Indiana, Kentucky, Massachusetts, Mississippi, Missouri, North Carolina, Rhode Island, and Texas. The amounts retained by the 11 states represented 15% of federal DSH payments. If we assume that only the federal share of DSH payments represents new money to facilities, "new" DSH funds would total $8.3 billion.

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