In 2002, approximately $15.9 billion was allocated in DSH payments, which are funds which match state payments to hospitals that finance the additional cost of serving the special needs of the community. Once the state has made such a DSH payment, the federal government reimburses the state for part of the payment, based on the state’s Medicaid matching rate.

DSH allocations are capped on a state-to-state basis, and the amount states have available in DSH funds vary depending on historical usage.  Thus, although there are a few states that have substantial funds available, most do not.  Additionally, because DSH payments are “matching funds” they are also subject to the state’s willingness to provide funding.

DSH funds are allocated largely at the discretion of state government with little oversight from the federal government with respect to the recipient such funds.  DSH funds can also be used for any statewide project that helps to reduce the number of people who are uninsured, and has been a regular source of funding for state and/or city universal care initiatives.

In Massachusetts, the state DSH payment was among the largest components of capital used to generate sufficient revenue to expand coverage to cover Massachusetts uninsured population.   Massachusetts DSH Limit in 2007 is $545.7 mm.

In San Francisco, DSH monies support their universal healthcare at $73 million over 3 years to assure that the uninsured population receives service.

Speaks to multiple leverage points.

• Potential  of new alliances to create risk pooling or collective purchasing/action
• As states become purchasers or insurers when introducing some form of universal healthcare insurance, they also become potential partners/allies
• Healthcare defined as a public good leading to new social contracts:
• This is a pool of tax dollars used to fund healthcare payment, which by definition renders healthcare a public good
• Rebalancing of Intermediation and Disintermediation:

Depending on how state universal healthcare is defined, this pool of capital may reduce intermediation to a point where state paid doctors are merely delivering services to state insured patients, eliminating an intermediary.