WASHINGTON, D.C, – Yesterday, Senator Jim Banks (R-Ind.) introduced legislation to ensure that Indiana gets its fair share of Medicaid Disproportionate Share Hospital (DSH) funding. Hospitals that treat very high percentages of Medicaid and low-income Medicare patients receive these federal payments to help cover their costs, but a 2021 recalculation shortchanged Indiana, New York, and several other states.
County hospitals, rural hospitals, and urban hospitals in low-income areas have been hit hardest, costing Indiana roughly $140 million annually. This bill would restore the pre-2021 Medicaid DSH payment formula and distribute federal funding, which is already appropriated, more fairly. Rep. Nick LaLota is leading the Save our Safety-Net Hospitals Act in the House.
Senator Jim Banks (R-Ind.): “Hospitals like Methodist, Schneck, and Reid are struggling because of an unfair federal formula. This bill fixes that, and helps Indiana hospitals get their fair share of funding.”
Matthew Doyle, President and CEO, Methodist Hospitals: “Methodist is a true safety net hospital and 80% of our patients are covered by Medicaid/Medicare. Our mission, that has remained a constant through our 102 years, is to provide high quality healthcare to all those in need. The residents of Gary and Northwest Indiana deserve the same high quality health care as other Americans, and I appreciate Sen. Banks’ legislation that would help ensure they can continue to receive it.”
Eddie Melton, Mayor of Gary: “Methodist Hospitals is the only hospital serving Gary, Indiana. It provides essential access to physicians, specialized care, and critical health services that our families depend on every day. We urge our legislators to stand with Methodist Hospitals in its efforts to continue to deliver the care our community needs and deserves.”
Kyle Allen, Sr., Lake County Commissioner: “Methodist Hospitals, one of the largest employers in Lake County, Indiana with an economic impact of more than $1 billion annually, plays an important role in serving the region’s most vulnerable citizens. Its continued success is important to the future of Lake County.”
Dr. Eric Fish, President/CEO of Schneck Medical Center: “DSH payments have been crucial to funding the gap in uncompensated care, but Section 203 of the Consolidated Appropriations Act of 2021 drastically changed how such uncompensated care is calculated – even though the care continues to be provided. Thank you to Senator Banks, Senator Gillibrand, and Congressman LaLota for introducing this important legislation to help rural hospitals like Schneck, and other hospitals across Indiana, continue to care for all Hoosiers.”
Ben Wells, President/CEO of Reid Health: “Reid Health has served East Central Indiana for more than 120 years and is committed to providing care and bettering the health of all individuals in our region. More than 80% of our patients are covered by Medicaid and/or Medicare, which does not fully cover the cost of care provided. For many years, DSH payments were an essential part of covering that loss and preserving essential services for our region, but Reid Health did not receive any DSH payments in 2023 and will not quality for them in 2024 or 2025. This places a tremendous strain on our ability to meet the growing needs of our communities. Reid Health appreciates Sen. Banks’ work on this issue to ensure the East Central Region of Indiana continues to thrive for years to come.”
Key Provisions of the Save Our Safety-Net Hospitals Act of 2025 are:
- Restore the Medicaid DSH payment formula that existed before FY 2021.
- Allow states to compute DSH payments including low-income “dual eligible” Medicaid and Medicare patients.
- Boost payments to Indiana hospitals by roughly $140 million annually and benefit several other states.
- Allow states to spend unspent DSH payments from earlier years, without any new appropriations.
Full bill text can be found here.
Background:
Hospitals serving many low-income patients receive Medicaid Disproportionate Share Hospital (DSH) payments. These payments used to include both Medicaid and Medicare SSI patients, but the 2021 fiscal consolidated appropriations act removed Medicare SSI patients from the calculation and capped DSH payments.
While most states never fully covered hospital costs, states like Indiana—which counted “dual eligible” Medicaid and Medicare patients—were hit hard. Indiana hospitals now face roughly $140 million in annual unreimbursed costs. Methodist Hospitals, in Gary in Merrillville, have particularly been hard hit. Restoring the DSH payment formula can avert service reductions and even save safety-net hospitals like Methodist