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States Take Lead on Covering Uninsured

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In many states, poorer hospitals could soon be the beneficiaries of the comparative largesse of their better-performing peers if some state legislatures have their way with a variety of plans aimed at covering the uninsured.

With the federal government seemingly out of the picture for a broad solution to providing health insurance to the uninsured, many states are moving ahead with their own initiatives. But as proposed, some are troubling for the major rating agencies that gauge the risk associated with nonprofit hospitals’ debt.

While all of the proposals in the nine states profiled in a recent Moody’s report will increase the numbers of people in those states who have health insurance, analysts are concerned with potential unintended consequences. The proposal that would achieve universal healthcare coverage in California, for instance, is funded at least partially through a so-called “coverage dividend” of 4 percent of gross revenues from hospitals and 2 percent from physicians. Though Moody’s opinion is that the healthcare system overall will benefit from a program that will insure the state’s 19 million estimated uninsured, some hospitals might be net losers.

“The guys that are operating in the affluent suburbs are probably going to be net payers under such a scenario,” says Bruce Gordon, Moody’s senior vice president in the public finance healthcare ratings group.

At least California has specified how it might pay for such a program. The impact on credit ratings from universal healthcare proposals in other states are even less clear, as the plans don’t specify where funding will come from. “Most states were probably careful not to cite the funding source, because you don’t want to blow it out of the water at the get-go by developing enemies,” says Gordon. “Rather, you want to get the ball rolling with sponsors who think that generically it’s a good thing to do.”

Massachusetts’ already-passed universal health plan started out with few funding specifics, Gordon notes. But again, while the overall expected effect on providers is expected to be positive, some hospitals will benefit less and some more, depending on the location of the hospital and the amount of charity care it currently provides, Gordon says.

“There’s no free lunch here. Someone will have to pay for this at the end of the day.”

—Philip Betbeze