No Good Deed Goes Unpunished

The cost-reductions built into the are based upon the assumption that as the number of uninsured decreases, the need for federal subsidies to hospitals providing uncompensated care will also decrease.  However, 25 states have declined Medicaid expansions, and in total the ACA will cover only an additional 20 million of the estimated 50 million uninsured Americans.

As implementation of the ACA progresses, , especially Medicaid disproportionate-share hospitals (Medicaid-DSH).

A new analysis from researchers at Georgia State University defines the upcoming policy and financial challenges for hospitals that are part of America’s safety network.

The analysis organized states into discrete groups based on their hospital’s dependence on Medicaid payments, their level of uncompensated care, how much uncompensated care was defrayed by government subsidies, and whether they were in Medicaid expansion states. The study showed that irrespective of Medicaid expansion, all states would have to face a greater financial burden in the provision of care to indigent populations as the ACA draws back on subsidizing hospital costs.

Furthermore, experts predict that for-profit hospitals will stop providing services that are primarily used by indigent and uninsured populations (OB/GYN, mental health) as government subsidies decrease, increasing the dependence on community hospitals. At the same time, these community hospitals in non-expansion states will not see a decrease in uncompensated care, as lack of Medicaid expansion excludes a large portion of their patient community from ACA reform.

The ACA takes steps towards improving the American health care system, but has several built-in assumptions that could lead to worse health care provision. As regional and national politics weaken the ability of the ACA to cover uninsured patients, projected savings for states and hospitals are also being negatively affected.  This is an especially dangerous for community hospitals that are already troubled financially. Without further reform, states will have increasing difficulty in maintaining their social safety network and will have to make decisions in balancing health care provision and financial stability.

commentary by Orlando Sola

Orlando Sola is a medical student at Columbia University’s College of Physicians and Surgeons.  He completed his Masters in Public Health at Johns Hopkins Bloomberg School of Public Health and is currently acting as the Latino Medical Student Association National Policy Chair. This commentary solely reflects the opinions of the author and is not representative of the LMSA.

Abstract

Medicaid disproportionate-share hospital (DSH) payments are expected to decline by $35.1 billion between fiscal years 2017 and 2024, a reduction brought about by the Affordable Care Act (ACA) and recent congressional action. DSH payments have long been a feature of the Medicaid program, intended to partially offset uncompensated care costs incurred by hospitals that treat uninsured and Medicaid populations. The DSH payment cuts were predicated on the expectation that the ACA’s expansion of health insurance to millions of Americans would bring about a decline in many hospitals’ uncompensated care costs. However, the decision of twenty-five states not to expand their Medicaid programs, combined with residual coverage gaps, may leave as many as thirty million people uninsured, and hospitals will bear the burden of their uncompensated care costs. We sought to identify the hospitals that may be the most financially vulnerable to reductions in Medicaid DSH payments. We found that of the 529 acute care hospitals that will be particularly affected by the cuts, 225 (42.5 percent) are in weak financial condition. Policy makers should recognize that decreases in revenue may affect these hospitals’ ability to give vulnerable populations access to care. PMID: 25367999

Cole, ES et al. Health Aff. 2014; 33 (11): 2025-33.