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2.95 percent for several months during the fiscal year due to federal legislation, and a factor totake into account the one-month difference between the federal fiscal year and Texas’ statefiscal year. 80 (The basic rate, not the enhanced rate, applies to the DSH program.)Combined federal and state spending for Medicaid in Texas was projected to be $15.5 billion inSFY 2004, not including DSH payments (which add another $1.5 billion, as detailed below).This has almost doubled from a budget of $8.2 billion in 1996. The Medicaid budget (excludingDSH) has gone from being 20.5 percent of the state budget in 1996 to 26.1 percent of thebudget in 2004. Of the total state Medicaid budget of $17 billion estimated for SFY 2004, 87percent is for payment of health services, 9 percent is for DSH payments, and 4 percent is foradministration. 81Table 2. Medicaid Fiscal Trends in Texas, Selected YearsFiscalYearTotal Medicaid Budget(state plus federal, in billions), ExcludingDisproportionate Share PaymentsPercent of Total StateBudget (All Funds)1996 $8.178 20.5%1998 $8.943 20.8%2000 $10.363 21.0%2002 $13.128 23.1%2004 $15.543 26.1%Sources: Texas Health and Human Services Commission, Texas Medicaid in Perspective, 5th ed., 2004, Chapter 5,Table 5.1, available at http://www.hhsc.state.tx.us/medicaid/reports/PB5/PinkBookTOC.html, accessedDecember 28, 2004.Disproportionate Share Hospital Program in TexasDisproportionate share hospital payments are an important source of revenue for manyhospitals, helping them to defray costs of uncompensated care to indigent and uninsuredpatients. The DSH program is the only Medicaid program where reimbursement does not haveto be solely for the treatment of Medicaid patients; it can help reimburse the uncompensatedcosts of treating uninsured patients as well. In state fiscal year 2003, 181 hospitals in Texasreceived $1.294 billion in DSH payments (federal and state dollars combined). Of thesehospitals, 14 were state hospitals, 80 were public, 50 were non-profit, and 37 were private forprofithospitals. 82,83All children’s hospitals and three University of Texas teaching hospitals are eligible to receiveDSH funds as long as they meet certain federal and state qualifications. 84 Federal standardssay that DSH-eligible hospitals must have a Medicaid utilization rate of at least 1 percent, andmust have at least two doctors with admitting privileges who accept Medicaid and provide nonemergencyobstetrical services (except at children’s hospitals). 85 All other hospitals must qualifyfor DSH payments by meeting one of three criteria: they must have a 1) disproportionatenumber of inpatient days for Medicaid patients, 2) disproportionate percentage of inpatient daysfor Medicaid patients, or 3) disproportionate percentage of inpatient days for low-incomepatients. 86For a hospital in Texas to qualify for DSH using Medicaid inpatient days, its number of inpatientdays of Medicaid patients must be above the mean number of Medicaid inpatient days of allMedicaid hospitals, plus one standard deviation. Medicaid hospitals in counties defined asB-17