On April 29, 2025, the U.S. Supreme Court ruled 7–2 in favor of the Department of Health and Human Services (HHS) in a significant case concerning how Medicare Disproportionate Share Hospital (DSH) payments are calculated.
What happened
The case addressed the interpretation of a key component in the DSH payment formula, specifically, how to count Supplemental Security Income (SSI)-eligible Medicare beneficiaries. HHS has long maintained that only Medicare patients who actually receive monthly SSI cash benefits should be included in the numerator of the DSH calculation, which determines how much financial assistance hospitals receive for serving low-income populations.
The American Hospital Association (AHA), along with other national hospital associations, challenged this interpretation in an amicus brief filed on August 14, 2024, arguing that HHS undercounted eligible patients by requiring actual benefit receipt, rather than eligibility, thereby reducing hospital reimbursement.
Despite the AHA’s position, the Supreme Court upheld HHS’s approach, affirming that patients not receiving SSI payments cannot be counted as SSI-eligible in the DSH formula. This ruling reinforces HHS’s long-standing policy and has implications for how much funding hospitals serving low-income populations will receive moving forward.
What was said
According to the AHA amicus brief, “In particular, hospitals incur significant uncompensated costs when treating the neediest patients. Those costs burden hospitals in poorer communities, and can force hospitals to terminate important programs or even shut down for good. Congress mandated “disproportionate share hospital” (DSH) payments to solve that problem. By offsetting a portion of hospitals’ otherwise uncompensated costs, DSH payments help hospitals stay afloat and allow them to continue offering 24/7 care to America’s most vulnerable populations. Under a formula set by Congress, a hospital’s DSH payments are pegged to the size of its needy-patient population. To measure that population, the DSH formula focuses on three public-assistance programs: Medicare, Medicaid, and Supplemental Security Income (SSI).”
Why it matters
By affirming HHS’s interpretation that only patients who actually receive SSI benefits can be counted in the numerator of the DSH payment formula, the decision narrows the group of Medicare beneficiaries hospitals can include. This smaller count results in a lower DSH fraction and therefore reduces the overall payments hospitals receive under the DSH program.
The AHA and other hospital advocates argued that many patients who qualify for SSI may not receive monthly cash benefits for various reasons (such as administrative delays or dual eligibility with other benefits), but still incur costs for hospitals.
With this narrower interpretation upheld, safety-net hospitals, which rely heavily on DSH payments to offset the costs of uncompensated care, may face additional financial strain, making it harder to maintain services, staffing, and resources in communities with high numbers of vulnerable patients.
Related: HIPAA Compliant Email: The Definitive Guide (2025 Update)
FAQs
What is Medicare and who is eligible?
Medicare is a federal health insurance program primarily for people aged 65 and older, as well as certain younger individuals with disabilities or specific conditions like End-Stage Renal Disease (ESRD) or ALS.
What are the different parts of Medicare?
Medicare consists of Part A (hospital insurance), Part B (medical insurance), Part C (Medicare Advantage plans that combine Parts A and B with additional benefits), and Part D (prescription drug coverage).
What is the difference between Medicare and Medicaid?
Medicare is primarily age- or disability-based health insurance, while Medicaid provides health coverage for low-income individuals and families; some people qualify for both.
What are Medigap plans?
Medigap plans are private supplemental insurance policies that help cover out-of-pocket costs not paid by Original Medicare Parts A and B but do not include prescription drug coverage.
How do Medicare Savings Programs help?
These programs assist eligible beneficiaries with paying Medicare premiums, deductibles, and coinsurance to reduce financial burden.
Kirsten Peremore
