New Hampshire hospitals are concerned that the Governor’s budget significantly underfunds disproportionate share hospital (DSH) payments.  Funding at the Governor’s proposed budget level of $166 million annually would potentially violate the settlement agreement reached in 2014 when two state Superior Court judges ruled that the Medicaid Enhancement Tax (MET) was unconstitutional. 

These rulings created a crisis for the state, which then faced a downgrade in its bond rating and a potential budget shortfall of several hundred million dollars.  To avert the crisis, the State of New Hampshire entered into a settlement agreement with New Hampshire’s hospitals.  As part of that settlement, hospitals agreed to drop constitutional challenges and continue to pay the MET with written assurances that they would receive a fixed percentage of their uncompensated care as a DSH payment.  

The DSH program reimburses hospitals for the uncompensated care they provide to patients.  Every dollar that gets paid to hospitals in DSH payments comes from taxes hospitals pay through the state’s MET, which is matched dollar for dollar by the federal government.  No additional state general fund revenues are used for this purpose.  After making DSH payments to hospitals, the state is able to use over half of this revenue to underwrite the state’s Medicaid program.

The settlement agreement established minimum and maximum levels of funding needed to sustain the program and protect both the state and hospitals.  According to the settlement agreement, hospitals are projected to pay MET taxes of approximately $236 million in FY 2018 and $243 million in FY 2019, with DSH payments expected to be at the agreed upon cap of $241 million each year.  Funding DSH at $166 million in each of the next two years potentially puts the state in violation of the settlement agreement. Estimates of the amount of uncompensated care that hospitals provide are consistent with multiple recent federal court decisions, including one here in New Hampshire, that ensure consistent application of long-standing federal rules.

New Hampshire hospitals are on the front lines of caring for New Hampshire’s low-income, and most vulnerable citizens. We are extremely proud of the compassion and dedication of our hospitals to ensure the patients who depend on them are able to get the care they need, regardless of their physical or financial health.  

We will work with the Governor and lawmakers as the budget moves forward to address these concerns and the significant risks to the state and patient care of not budgeting in compliance with the settlement agreement.


Steve Ahnen 

President, New Hampshire Hospital Association