SEC. 1112. MEDICARE DSH REPORT AND PAYMENT ADJUSTMENTS IN RESPONSE TO COVERAGE EXPANSION.

[a] DSH Report-

[1] IN GENERAL- Not later than January 1, 2016, the Secretary of Health and Human Services shall submit to Congress a report on Medicare DSH taking into account the impact of the health care reforms carried out under division A in reducing the number of uninsured individuals. The report shall include recommendations relating to the following:

[A] The appropriate amount, targeting, and distribution of Medicare DSH to compensate for higher Medicare costs associated with serving low-income beneficiaries [taking into account variations in the empirical justification for Medicare DSH attributable to hospital characteristics, including bed size], consistent with the original intent of Medicare DSH.

[B] The appropriate amount, targeting, and distribution of Medicare DSH to hospitals given their continued uncompensated care costs, to the extent such costs remain.

[2] COORDINATION WITH MEDICAID DSH REPORT- The Secretary shall coordinate the report under this subsection with the report on Medicaid DSH under section 1704[a].

[b] Payment Adjustments in Response to Coverage Expansion-

[1] IN GENERAL- If there is a significant decrease in the national rate of uninsurance as a result of this Act [as determined under paragraph [2][A]], then the Secretary of Health and Human Services shall, beginning in fiscal year 2017, implement the following adjustments to Medicare DSH:

[A] The amount of Medicare DSH shall be adjusted based on the recommendations of the report under subsection [a][1][A] and shall take into account variations in the empirical justification for Medicare DSH attributable to hospital characteristics, including bed size.

[B] Subject to paragraph [3], increase Medicare DSH for a hospital by an additional amount that is based on the amount of uncompensated care provided by the hospital based on criteria for uncompensated care as determined by the Secretary, which shall exclude bad debt.

[2] SIGNIFICANT DECREASE IN NATIONAL RATE OF UNINSURANCE AS A RESULT OF THIS ACT- For purposes of this subsection--

[A] IN GENERAL- There is a 'significant decrease in the national rate of uninsurance as a result of this Act' if there is a decrease in the national rate of uninsurance [as defined in subparagraph [B]] from 2012 to 2014 that exceeds 8 percentage points.

[B] NATIONAL RATE OF UNINSURANCE DEFINED- The term 'national rate of uninsurance' means, for a year, such rate for the under-65 population for the year as determined and published by the Bureau of the Census in its Current Population Survey in or about September of the succeeding year.

[3] UNCOMPENSATED CARE INCREASE-

[A] COMPUTATION OF DSH SAVINGS- For each fiscal year [beginning with fiscal year 2017], the Secretary shall estimate the aggregate reduction in Medicare DSH that will result from the adjustment under paragraph [1][A].

[B] STRUCTURE OF PAYMENT INCREASE- The Secretary shall compute the increase in Medicare DSH under paragraph [1][B] for a fiscal year in accordance with a formula established by the Secretary that provides that--

[i] the aggregate amount of such increase for the fiscal year does not exceed 50 percent of the aggregate reduction in Medicare DSH estimated by the Secretary for such fiscal year; and

[ii] hospitals with higher levels of uncompensated care receive a greater increase.

[c] Medicare DSH- In this section, the term 'Medicare DSH' means adjustments in payments under section 1886[d][5][F] of the Social Security Act [42 U.S.C. 1395ww[d][5][F]] for inpatient hospital services furnished by disproportionate share hospitals.