Medicaid and Medicare Disproportionate Share Hospital programs

January 22, 2014

A stethoscope lying on money.Congress created the Disproportionate Share Hospital (DSH) program in the early 1980s to help hospitals offset the costs of providing care to low-income individuals. Medicaid and Medicare each have a distinct DSH program, with a unique structure and financing mechanism.

In addition to giving a brief overview of the Medicaid and Medicare Disproportionate Share Hospital programs, this document will:

  • Discuss the role of the state and federal governments in running the Medicaid DSH program;
  • Explain how the Michigan Medicaid DSH program is financed and structured; and
  • Examine the changes to the Medicaid and Medicare DSH programs under the Patient Protection and Affordable Care Act (ACA).

Like the Medicaid program generally, the Medicaid DSH program is a federal-state partnership, which means that:

  • States have significant flexibility to structure their own DSH program;
  • State DSH programs vary widely throughout the country; and
  • The federal government reimburses each state for its share of DSH spending at the state’s regular Federal Medical Assistance Percentage (FMAP) rate.

Under federal law, states are required to make DSH payments to all hospitals that serve more than a certain percentage of Medicaid and low-income patients. In order to be eligible for state DSH payments, each hospital must meet minimum federal criteria.

The Michigan Medicaid DSH program is structured and partially financed by the state. All state DSH payments, up to Michigan’s annual federal limit, are matched by the federal government at Michigan’s normal FMAP rate (66.39 percent in FY2013).


Suggested Citation: Hatch-Vallier, Leah; Udow-Phillips, Marianne. Medicaid and Medicare Disproportionate Share Hospital Programs. January 2014. Center for Healthcare Research & Transformation. Ann Arbor, MI.

Special thanks to Ellen Rabinowitz and Eileen Ellis.