Medicare and Medicaid underpayments to the nation's hospitals relative to the cost of care rose more than eight-fold, from $3.8 billion in 2000 to $32.4 billion in 2008, the American Hospital Association reported in its latest release of annual reimbursement fact sheets.
The difference is borne by payments from health plans and other government and private payers, says Caroline Steinberg, AHA vice president for trends analysis.
Medicare is only a slightly better payer than Medicaid, and neither pays 100% of the cost of care for beneficiaries, according to the AHA. For Medicare, hospitals on average received 91 cents for every dollar in cost of care in 2008 and for Medicaid, it was 89 cents. Steinberg said that in 2007, Medicare paid the same, 91 cents, but Medicaid paid one cent less, 88 cents.
Steinberg says this does not reflect the true current picture, which is even worse because of the economic downturn in the last year.
"The majority of our hospitals are telling us they're seeing significantly more patients that are uninsured," which translates to even more undercompensated and uncompensated care, Steinberg says. During economic recessions, she says, patients tend to show up at hospitals when they are sicker because when they lose health coverage, they tend to delay care until they need it.
"It's a bit of a misconception that people go to the emergency department for non-urgent conditions," she says.
The AHA also reported that nationally, uncompensated care—care provided for which there is no reimbursement at all—has continued to rise, from $21.6 billion in 2000 to $31.2 billion in 2006 to $34 billion in 2007 and to $36.4 billion in 2008.
The AHA issued its findings in two sets of fact sheets, one on underpayment by Medicare and Medicaid, and the other on uncompensated hospital care, also called charity care or bad debt.
The fact sheets are issued annually by the AHA based on the organization's annual survey and reflect the economic health of some 5,010 hospitals nationwide.
Robert Zirkelbach, director of strategic communications for America's Health Insurance Plans, says the rising trend only means higher costs for families and employers with private coverage. The average family of four is paying $1,500 a year in higher premiums to offset underpayments from Medicare and Medicaid, he says.
It's important to understand in the context of health reform discussions, he adds, "any public health plan that pays close to Medicare rates will exacerbate the cost shift to people with private coverage."
He says the AHA's grim picture of low reimbursement to hospitals, an amount that must be supplemented by private payers, does not take into account the added burden from uncompensated care provided by physicians.