Medicaid:

Disproportionate Share Policy

HRD-93-3R: Published: Dec 22, 1992. Publicly Released: Jan 22, 1993.

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Pursuant to a congressional request, GAO reviewed the Medicaid disproportionate share program, focusing on: (1) how states designate disproportionate share hospitals and formula used to reimburse the hospitals; (2) the impact of charity care on state disproportionate share formula; and (3) Texas' experience with the program. GAO found that: (1) states have a significant amount of control over which hospitals to designate as disproportionate share recipients and the amount of reimbursements hospitals receive, which has resulted in a wide variation in reimbursement amounts across the states; (2) the number of hospitals qualifying for the program has increased; and (3) although legislation required states to consider charity care in their program decisions and formula, there was little federal guidance and no standard definition of charity care for states to follow. GAO also found that Texas: (1) received an exemption to use its own unique formula in designating hospitals, and has 37 percent of its hospitals qualified for disproportionate share payments; (2) disproportionate share programs are expected to generate $1 billion in federal funds in fiscal year (FY) 1992; (3) will be limited to FY 1992 payment levels, since federal legislation has placed expenditure caps on state disproportionate share programs; and (4) has developed an alternative measure to charity care that takes into consideration care for poor patients who do not qualify for Medicaid.

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