States' use of Medicaid UPL and DSH financing mechanisms

Using data from a 2002 survey, we look at the design and operation of disproportionate-share hospital (DSH) and upper payment limit (UPL) programs in thirty-four states. We find that more of the available DSH gains are paid to safety-net hospitals than occurred in the late 1990s. By contrast, survey data suggest that the bulk of available UPL gains are being kept by states and not by providers. Using simulation analyses, we estimate that because of DSH and UPL practices among the survey states, the effective 2001 federal Medicaid match rate was about three percentage points higher on average in these states than it would have been otherwise.