An important distinction of safety net hospitals is that they provide care to vulnerable populations. Unfortunately, there is no general agreement on which groups should be considered vulnerable. The Institute of Medicine's recent report, America's Health Care Safety Net, adopted a broad definition of vulnerable populations--including the "uninsured, Medicaid and other vulnerable patients" (IOM 2000). The other vulnerable groups included homeless persons, persons with HIV, substance abusers, and the mentally ill.
A big issue is whether low-income patients with insurance should be included in the definition of vulnerable. Some argue that vulnerable should be limited to indigent, uninsured patients whereas others argue that Medicaid patients should be considered a vulnerable population (IOM, 2000). The principal argument for excluding low-income Medicare patients (i.e., those that are entitled to SSI) and Medicaid patients is that they have insurance and thus have access to the health care system. The uninsured, by contrast, have no insurance, and generally have very limited ability to pay for their care. The arguments for counting Medicaid patients as a vulnerable population is that, despite having insurance, Medicaid patients often have trouble gaining access to health care services because of the historically low program payment rates. Further, their low-income and complex health care needs make them a vulnerable population. Moreover, including Medicaid patients improves the geographic balance between states that have expansive Medicaid programs and those that do not.
Reflecting its status as a federal health insurance program, the Medicare DSH formula takes into account low-income patients covered by Medicaid as well as Medicare. Hospitals get no credit for serving patients covered by other indigent care programs or the uninsured. Owing to the flexibility provided by Medicaid statute, Medicaid state DSH programs vary greatly, both in terms of how hospitals are determined eligible for payments and how payments are allocated among qualifying hospitals. Colorado, for example, largely relies on the federal minimum definition for identifying DSH hospitals. For payment, they use a range of methods including a proportional payment that varies by how the hospital qualifies for DSH. They also have a special program that makes DSH payments based on the facilities proportional level of services provided to the beneficiaries of the Colorado Indigent Care Program, a state-funded program that provides health care services to low-income persons who do not qualify for Medicaid. Florida operates six DSH programs each using different eligibility criteria. One program pays DSH payments to hospitals that provide inpatient services to high cost Medicaid beneficiaries. Another program provides DSH funds based on the number of inpatient admissions referred from county health departments for treatment of communicable disease. Similarly, Massachusetts has several DSH programs that use a range of criteria to issue payments including the volume of hospital services provided to low-income unemployed persons, low- income children, and low-income disabled individuals.