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Analysis

Medicare, Medicaid Shortchanged Hospitals $76.8B

By John Commins  
   January 07, 2019

Hospitals were paid 87 cents for every dollar they spent on care for Medicare and Medicaid patients. In addition, hospitals provided $38.4 billion in uncompensated care in 2017.

Medicare and Medicaid underpaid the nation's hospitals by $76.8 billion in 2017, according to new data from the American Hospital Association's annual hospital survey.

Medicare underpayments in 2017 totaled $53.9 billion and Medicaid underpayments totaled $22.9 billion. In addition, hospitals provided $38.4 billion in uncompensated care in 2017, AHA reported.

Medicare and Medicaid are voluntary programs. Hospitals are not required to participate in either program, but they must if they want to maintain their not-for-profit, tax-exempt status.

In addition, Medicare and Medicaid programs account for more than 60% of all care provided by hospitals, so few hospitals can choose not to participate.

Among the findings in the new AHA survey:

  • In the aggregate, both Medicare and Medicaid payments fell below costs in 2017.
     
  • Combined underpayments were $76.8 billion in 2017. This includes a shortfall of $53.9 billion for Medicare and $22.9 billion for Medicaid.
     
  • For Medicare and Medicaid, hospitals received payment of only 87 cents for every dollar spent by hospitals caring for Medicare patients in 2017.
     
  • In 2017, 66% of hospitals received Medicare payments less than cost, while 62% of hospitals received Medicaid payments less than cost.

The uncompensated care losses do not account for other services and programs that hospitals provide to meet community needs, such as population health initiatives. 

A 2017 study commissioned by AHA estimated that not-for-profit hospitals secured $6 billion in federal tax breaks in 2013 due to their tax-exempt status. However, those not-for-profit hospitals also provided $67.4 billion in community benefits, which is 11 times greater than the value of the tax breaks.

John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.


KEY TAKEAWAYS

Medicare underpayments in 2017 totaled $53.9 billion and Medicaid underpayments $22.9 billion.

Hospitals provided $38.4 billion in uncompensated care in 2017.


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