Medicaid Ruling Creates Major Budgeting Problem
These two parts of the ACA, had they remained intact, would have positively influenced the bad debt and charity care at many hospitals and health systems.
But when the courts ruled that the federal government may not monetarily punish states that refuse to expand Medicaid eligibility, it took the teeth out of the legislation, says Michael Freed, executive vice president and CFO at Spectrum Health, a nine-hospital system in western Michigan with nearly 9,000 beds, and president and CEO of Priority Health, the system's health plan with over 600,000 covered lives.
"I imagine most providers came away from this [ruling] thinking they were going to do okay—the worst-case scenario from this is they will get the same amount of Medicaid as they planned for. But how this will play out actually gets very hard to predict," says Freed.
With the door open for states to opt out of Medicaid expansion, it's anyone's guess what will happen in each state, he says. If a state opts out, it would cause residents who fall in the 100%-133% poverty range to seek subsidies for private insurance, which is fully funded by the federal government. However, having to pay for their own insurance may lead many individuals to hold off on getting coverage until it's absolutely necessary.
"If there's no enforcement of the insurance mandate, I can envision people waiting until they are very sick to purchase insurance [through an exchange], and that will drive up the insurance costs and make that insurance pool price very high," he says.
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