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The White House wants to reverse $500 million in Medicaid cuts

The White House wants to reverse $500 million in cuts to the Medicaid program meant to start in 2014, aiming to ensure that states have adequate funds to assist those that remain uninsured under the Affordable Care Act.

A bit of history is helpful here. For decades now, Medicaid has sent states billions of dollars in something called Disproportionate Share, or DSH, payments. These funds, which totaled $11.3 billion in 2011, go to the hospitals that provide a higher level of uncompensated care and are meant to help offset the bills of the uninsured.

At first, the health law appeared to make DSH payments unnecessary. When the Affordable Care Act expanded Medicaid to 17 million Americans, it would significantly reduce the burden of unpaid bills on health-care providers.

The Supreme Court decision, however, changed the equation. It allowed states to opt out of the Medicaid expansion. Many Republican governors now say they won't move forward on that program, which means that a lot of the unpaid bills will still exist. And that left hospitals clamoring for these DSH cuts to be reversed so they could continue covering the uncompensated care they provide.

The White House budget essentially proposes something close to that: not reversing the DSH cuts, but delaying their implementation for one year.

"To better align DSH payments with expected levels of uncompensated care, the Budget proposes to begin reductions in 2015, instead of 2014," the White House proposes.

The DSH cuts are supposed to start in 2014 with $500 million in reductions and get bigger each year. In 2022, the DSH program faces a $4 billion reduction.

Shawn Gremminger, assistant vice president of legislative affairs at the National Association of Public Hospitals, describes the policy shift as unexpected.

"We didn't expect them to suggest delaying the DSH cuts, but we think this is a smart move," he said.

It's a surprising move for the White House in that it could make it a bit easier for states not to expand the Medicaid program. If they know the additional dollars are coming in, there's a bit less worry about turning down the Medicaid expansion funds.

To be sure, the DSH money is decidedly smaller than funds a state would get for expanding Medicaid. Still, it could make it easier to keep a current Medicaid program afloat.

At the same time, it recognizes the landscape right now: There are states that say they won't move forward on the Medicaid expansion. That has changed the landscape, which is what the White House is recognizing here.