HR-5064-119
Referred to the House Committee on Energy and Commerce.
Sponsored by Nick LaLota (R-NY)
What it does
This bill would modify how the federal government calculates the maximum Medicaid payment a hospital can receive under the Disproportionate Share Hospital (DSH) program, which compensates hospitals that treat large numbers of low-income and uninsured patients. Specifically, it would expand the types of costs and patients that count toward a hospital's payment cap, including costs covered by Medicare and private insurance plans, and would allow states to retroactively distribute unspent DSH funds from fiscal years 2021 onward under the new, more generous limits. It would also prohibit the federal government from recouping DSH payments already made to hospitals under the prior rules.
Who benefits
Safety-net hospitals — particularly large urban public hospitals and academic medical centers — that serve high volumes of Medicaid and uninsured patients and currently hit their DSH payment caps before recovering their full uncompensated care costs. States with unspent DSH allotments from prior years, which would gain flexibility to redistribute those funds. Low-income and uninsured patients who depend on safety-net hospitals for care, to the extent the bill helps those hospitals remain financially viable. Hospital workers at financially stressed safety-net facilities.
Who is hurt
Hospitals that currently receive a larger share of DSH funds under the existing formula may see their relative share reduced if the new cap calculation allows other hospitals to qualify for more. Taxpayers and the federal budget, to the extent that expanded payment limits increase total Medicaid DSH spending. States that have already spent their DSH allotments under the old rules would not benefit from the retroactive provisions. Smaller or rural hospitals that do not serve as primary safety-net facilities may face indirect competitive disadvantage if DSH funds shift toward larger urban hospitals.
Supporters argue
Supporters argue that the current DSH payment cap formula systematically undercounts the true cost burden on safety-net hospitals by ignoring Medicare and private insurance payments made on behalf of dual-eligible patients, causing hospitals to hit their caps before recovering actual uncompensated care losses. They contend that safety-net hospitals — which provide care regardless of ability to pay — are financially essential to low-income communities and that the existing formula has forced some facilities to operate at a loss, threatening closures that would leave vulnerable populations without access to care.
Opponents argue
Opponents argue that expanding the DSH payment cap increases federal Medicaid spending without addressing the underlying inefficiencies in how safety-net hospitals are funded, and that the retroactive provisions — allowing states to reopen and redistribute funds from fiscal years as far back as 2021 — create administrative complexity and potential for inconsistent application across states. They contend that the no-recoupment provision removes a financial accountability mechanism and that the additional funds may not be well-targeted, potentially flowing to hospitals that are not the most financially distressed rather than those with the greatest unmet need.
Constitutional context
Congress funds Medicaid through the Taxing and Spending Clause (Art. I, §8, cl. 1), attaching conditions to federal grants that states must follow. Under NFIB v. Sebelius (2012), such conditions are permissible so long as they do not cross into unconstitutional coercion — a threshold this bill, which expands rather than restricts state options, is unlikely to approach.
Checks and balances
Congress gains authority to set new DSH payment limits; the Secretary of Health and Human Services retains authority to approve or deny state plan amendments, including retroactive modifications; states retain discretion over how to distribute DSH funds within the new federal limits.
Historical precedent
Congress has repeatedly modified DSH payment formulas since the program's creation in the Omnibus Budget Reconciliation Act of 1981, including significant changes in the ACA (2010) that reduced DSH allotments and subsequent legislation that repeatedly delayed those reductions.