Safety Net Hospitals Face $53.3B in Uncompensated Care Costs by 2019

The U.S. Supreme Court ruling last summer that lets states opt out of Medicaid expansion under the Patient Protection and Affordable Care Act could saddle the nation's safety net hospitals with $53.3 billion in uncompensated care costs by 2019, according to the National Association of Public Hospitals and Health Systems.

"It's a projection based on [Congressional Budget Office] estimates of the additional number of uninsured as a result of the Supreme Court's decision," Beth Feldpush, vice president, policy and advocacy, at NAPH told HealthLeaders Media.

The June 28 landmark 5-4 ruling by the Supreme Court upheld key components of the PPACA,  including the individual mandate. However, the justices struck down as too coercive the law's attempts to get states to expand their Medicaid programs.

Feldpush says the high court's ruling skewed a balance in the law under which disproportionate share hospital payment cuts to safety net hospitals would be offset by expanded Medicaid coverage.

"Certainly the Supreme Court's decision changed the landscape. What was assumed to be Medicaid expansion in every state can't be assumed any longer," Feldpush says.

"When you think back to the assumptions that were made when the Affordable Care Act became law, at that time CBO said 'we expect 'X' number of people to get coverage and therefore the dollars in uncompensated care costs absorbed by hospitals will decrease.' The law was written with some sense of a balance between those two factors," she said.

"The Supreme Court decision now says Medicaid expansion is voluntary, but those cuts are hardwired into the law and we don't necessarily see a rise in the coverage on the other side to make a balance."

NAPH represents about 200 hospitals and health systems that are often the primary source of healthcare to Medicaid and uninsured patients. Typically in the communities that these hospitals serve 15% of the population is uninsured and nearly one-third of the population relies on government-sponsored healthcare coverage.  

The CBO estimates the court's decision will result in six million to 10 million more uninsured people than estimated when Congress passed the PPACA in March 2010, bringing the total number of uninsured individuals to 29 million by FY 2019, NAPH said in a new report.

"This unexpected new level of cost to hospitals and health systems dramatically amplifies the impact of the Medicaid DSH cuts, which will total $14.1 billion over the same period.

The combined effect will jeopardize access to important healthcare services for vulnerable people and shift additional and burdensome uncompensated care costs onto state and local governments, providers, and taxpayers," NAPH said.

NAPH noted that DSH now doesn't cover all uncompensated care costs and Medicaid payment shortfalls and hasn't kept pace with the growth in the uninsured population and the cost of caring for them.

A NAPH survey of 87 safety net hospitals for 2010 found that they had incurred more than $8.4 billion in uncompensated care costs but received only $4 billion in Medicaid DSH payments.

The DSH payment cuts go into effect in federal fiscal year 2014, which starts on Oct. 1, 2013.

"Our reason for putting this out now is that Congress is going to be having a lot of tough discussions around making some considerations for the budget and we expect healthcare issues to be on the table during those discussions," Feldpush says.

"We want to remind folks that we have another issue that is coming down the pike pretty quickly that was not anticipated when the Affordable Care Act was written into law."

The PPACA gives the secretary of the Department of Health and Human Services discretion in how the DSH cuts are distributed across states.

"Given this discretion, it is crucial for regulatory decisions to address the uncertainties created by the imbalance between anticipated uncompensated care needs and the level of federal support to hospitals that shoulder the majority of this work," NAPH said in the report.