Save our Safety-Net Hospitals Act of 2025
- Sponsor
- Rep. LaLota, Nick [R-NY-1]
- Committees
- Energy and Commerce Committee (primary)
- Last action
- Aug 29, 2025
Bottom line
This bill aims to increase federal Medicaid DSH payments to safety-net hospitals by broadening the scope of uncompensated care costs that states can claim, potentially providing significant financial relief to hospitals serving a high volume of low-income patients.
What it actually does
This bill modifies how Disproportionate Share Hospital (DSH) payment adjustments are calculated under the Medicaid program by expanding the definition of "uncompensated care costs." It allows hospitals to include costs for individuals covered by both Medicaid and Medicare or other applicable plans, provided the hospital's total costs for those services exceed payments from all sources. The bill also grants states the option to retroactively utilize unspent DSH allotments from prior years (dating back to October 1, 2021) under these new, more expansive rules.
Proponents argue
Proponents argue that the current DSH payment methodology unfairly limits federal support for hospitals that serve a disproportionate share of low-income and uninsured patients, especially those with complex coverage situations like dual eligibility. They contend that including costs for patients covered by Medicare or other plans, where Medicaid is a secondary payor and total costs still exceed payments, more accurately reflects the financial burden on safety-net hospitals and prevents them from being penalized for serving these vulnerable populations. This change is seen as essential for the financial viability of hospitals that are critical for community health.
Opponents contend
Opponents might argue that expanding the definition of uncompensated care could lead to increased federal Medicaid spending without necessarily targeting the most financially distressed hospitals or truly uncompensated care. They might raise concerns about the potential for states to shift costs or maximize federal reimbursements in ways that do not align with the original intent of DSH payments, which is to support hospitals for care provided to uninsured and underinsured individuals. Concerns could also be raised about the complexity of auditing these expanded claims and ensuring proper use of funds.
The bill text is short and relatively technical, requiring careful reading to understand the specific amendments to the Social Security Act.
Section 2(a)(1)(A) of the bill, amending Section 1923(g)(1)(A) of the Social Security Act
Expanding Definition of Uncompensated Care Costs for DSH Payments
This provision modifies the calculation of a hospital's uncompensated care costs for Medicaid DSH payments. It removes an exclusion for certain hospitals and, crucially, adds payments made under Medicare (Title XVIII) or by "applicable plans" (as defined in Section 1862(b)(8)(F)) to the list of payments that reduce a hospital's uncompensated care costs. This means that for a hospital to claim uncompensated care costs for a patient, the total costs must exceed payments from all sources, including Medicare and other plans, not just Medicaid.
Supporters argue
Supporters argue this change provides a more accurate reflection of the financial burden hospitals face when serving patients with complex insurance arrangements, particularly those who are dually eligible for Medicare and Medicaid. It ensures that hospitals are not penalized for serving these vulnerable populations when total payments from all sources do not cover the cost of care.
Critics contend
Critics might argue that this expands the definition of "uncompensated care" beyond its traditional scope, potentially diverting funds from truly uninsured care or increasing federal outlays without clear justification for all included patient types.
Tradeoffs
The tension lies between providing comprehensive financial support to hospitals serving complex patient populations and ensuring DSH funds are strictly targeted to care for the uninsured or those with minimal coverage.
Section 2(a)(1)(B) of the bill, amending Section 1923(g)(1)(B) of the Social Security Act
Redefining Individuals Whose Costs Count Towards Uncompensated Care
This provision explicitly adds a new category of individuals whose services can be counted towards a hospital's uncompensated care costs for DSH purposes. This includes individuals eligible for Medicaid (or a waiver) for whom Medicaid is a secondary payor after Medicare (Title XVIII) or an "applicable plan," but only if the hospital's aggregate incurred costs for services to these individuals exceed the total payments received from Medicaid, Medicare, or the applicable plan during that year.
Section 2(a)(2) & (3) of the bill, striking and redesignating paragraphs in Section 1923(g) of the Social Security Act
Removing Exclusion for Certain Hospitals from DSH Limitations
This provision strikes paragraph (2) of Section 1923(g), which previously excluded certain hospitals (specifically, those with a high Medicaid inpatient utilization rate or low-income utilization rate) from the general DSH payment adjustment limitation. By removing this exclusion, the bill streamlines the DSH calculation rules, making the modified uncompensated care cost definition applicable more broadly.
Section 2(b)(2) of the bill
Retroactive Application of Modified DSH Cap to Unspent Allotments
This provision allows states to use unspent federal DSH allotments from Medicaid State plan rate years beginning on or after October 1, 2021, and before the bill's enactment date. States can use these unspent funds to increase payment adjustments to hospitals for those prior years, provided the increased payments are consistent with the newly modified DSH cap rules and do not exceed the state's total DSH allotment for the applicable federal fiscal year. States are also authorized to retroactively modify state plan amendments to facilitate these increases.
The bill expands the types of payments that must be offset against a hospital's costs when calculating uncompensated care, and the types of individuals whose costs can be included, by referencing "an applicable plan (as defined in section 1862(b)(8)(F))." This definition in existing law includes various forms of primary insurance, such as group health plans, workers' compensation, and liability insurance.
Section 2(a)(1)(A)(iii)(III) and 2(a)(1)(B)(iii)
Why it matters:This is standard legislative practice to avoid redundancy and rely on existing definitions in statute. It's not necessarily evasive but requires specialized knowledge to fully grasp.
Case for: Proponents would argue that by referencing an existing, comprehensive definition, the bill ensures consistency across federal healthcare programs and avoids creating new, potentially conflicting definitions. It also ensures that all primary payment sources are considered before a cost is deemed "uncompensated."
Case against: Critics might argue that relying on such a specific cross-reference makes the bill less transparent for general readers, requiring them to consult other parts of the U.S. Code to fully understand the scope of the changes.
Estimated impact: This broadens the scope of payments that must be accounted for when determining if a cost is "uncompensated," ensuring that DSH funds are truly for costs not covered by any primary payer. However, it also allows the inclusion of patients covered by these plans if total costs exceed all payments. The net effect is likely an increase in eligible DSH payments.