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.

In March, the U.S. Congress passed the Coronavirus Aid, Relief and Economic Security Act, which eliminates the FFY 2020 cut and delays implementation of the FFY 2021 cut until Dec. 1, 2020. 

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

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

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.


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

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

thumbnail of joint association letter to DSH
Joint-Association Letter Urging Texas Congressional Delegation to Address Medicaid DSH Cuts (10/23/19)

Letter to DSH
Bipartisan DSH Letter from 29 Texas Congressional Delegation Members to U.S. House Leadership (May 2019)