Disproportionate Share Hospital Subsidies for Treating the Uninsured

Investigation into subsidies for hospitals that provide a disproportionate share (DSH) of care to uninsured patients in California found that DSH subsidies do not effectively target the highest providers of care to the uninsured.

The authors of this study examined whether DSH subsidies in California actually reach hospitals that serve uninsured patients and whether receipt of DSH subsidies leads to lower prices for the uninsured. They researched California acute care private hospitals that report financial data to the state and used data covering 2001-2006. They defined relative price for uninsured patients as percent difference of uninsured payments from Medicaid payments for each hospital.

Key Findings:

  • Nonprofit, non-DSH hospitals provide 65 percent of all care to uninsured patients in private hospitals.
  • Hospitals with DSH subsidies provide less than one-third of all hospital care to uninsured in California; nonprofit DSH hospitals provide three times as much care as for-profit hospitals.
  • Uninsured patients pay lower prices in DSH hospitals than in non-DSH hospitals, but the price difference diminished from 2001-2006.

These findings support financing health care reform efforts to cover the uninsured by redirecting some federal DSH funding. However, this study may not apply to other states because of different state laws about Medicaid eligibility and DSH subsidy distribution.