Medicaid Disproportionate Share Hospital Payment Cuts

Under current law, all states' federal Medicaid DSH allotments were scheduled to be reduced by $4 billion in federal fiscal year 2020 (beginning Oct.1, 2019). Cuts will increase to $8 billion a year in fiscal years 2021 to 2025.

The U.S. Congress recently passed subsequent short-term budgets that temporarily delayed the cuts. Congress ultimately passed a spending package for 2020 that delayed the cuts to May 23, 2020. 

With so many issues before Congress, Texas hospitals need to stress the importance of eliminate permanently or, at a minimum, delaying for two years the imminent Medicaid DSH cuts.

In September 2019, the Centers for Medicare & Medicaid Services published a final rule describing its methodology for distributing the federal DSH allotment reductions. CMS will calculate individual states’ DSH reductions using each respective year’s preliminary DSH allotment as currently calculated under statue.

The Medicaid and CHIP Payment Access Commission estimates the reduction will be $440 million, or 22.7 percent of DSH payments, in 2020. The estimated cumulative reduction for fiscal years 2020 through 2025 totals $4.84 billion for Texas.


John Hawkins, senior vice president of government relations, 512/465-1505

Jennifer Banda, J.D., vice president of advocacy, public policy & HOSPAC, 512/465-1046

Kate Hendrix, senior director, policy analysis, 512/465-1556

thumbnail of joint association letter to DSH
Joint-Association Letter Urging Texas Congressional Delegation to Address Medicaid DSH Cuts

Letter to DSH
Bipartisan DSH Letter from 29 Texas Congressional Delegation Members to U.S. House Leadership