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August 25, 2023
Once More for Those in the Back
As we approach the end of the fiscal year, hospitals have begun raising the alarm about a coming increase in uncompensated care due to Medicaid redeterminations. So, let’s go over, yet again, why Medicaid redeterminations are highly unlikely to result in a significant drop in insurance coverage.
As the Weekly Checkup has covered previously, the Families First Coronavirus Response Act passed in March of 2020 with a provision mandating that, for the duration of the public health emergency (PHE), states could only receive the increased federal medical assistance percentage of 6.2 percentage points if they maintained Medicaid enrollment. Essentially, states couldn’t kick people off Medicaid, even if they were ineligible, as long as the PHE was in effect. At the start of the pandemic, when everyone was bracing for a 2008-style recession, this was seen as prudent. And while unemployment spiked from 3.5 percent to 14.7 percent in the first two months, by December 2020 it had quickly dropped to 6.7 percent and recovered almost entirely by December 2021 at 3.9 percent – meaning people had jobs again. Even as it became increasingly obvious that the public emergency was functionally over, some government agencies, media outlets, and others pushed scary reports that around 15–18 million people would be forced off Medicaid in the 14 months following the end of the PHE. Alarm bells continue to be raised to this day as states begin disenrolling those deemed ineligible for Medicaid. The point, of course, is that the Biden Administration, congressional Democrats, and many on the left generally do not believe people should be taken off government insurance for any reason – even though the Urban Institute has found that “virtually all” of those projected to be disenrolled from Medicaid would have health coverage options, between Medicaid and CHIP (being disenrolled due to paperwork issues doesn’t bar one from the programs), the Affordable Care Act (ACA) Marketplaces, and employer-sponsored insurance.
Why are hospitals adding their own clarion calls to the mix? The answer is that Medicare recently announced it expects to reduce disproportionate share hospital (DSH) payments by $957 million. The reductions are mainly a result of insurance coverage increases over the past few years, part of the ACA’s calculation of DSH payments that factors in the national uninsured rate. The fewer uninsured, the lower the DSH payments. Hospitals argue that these numbers do not factor in this years’ decrease in Medicaid enrollment, and they don’t – the formula only takes into account the uninsured rate through March of this year. The final rule on DSH payments predicted an uptick in the uninsured rate to about 8.3 percent from its current 7.7 percent level. It’s important to note that hospital payments overall are still expected to increase by 3.1 percent in 2024. It’s also important to note that hospitals are the ones who agreed to link payments to the uninsured rate back in 2013 during negotiations over the ACA. In fact, hospitals should consider themselves lucky. Under current statute, hospitals should actually face an additional $8 billion DSH cut this year and each of the next three years, but likely won’t because for the last 13 years, Congress has continuously delayed those DSH reductions that hospitals agreed to. Nevertheless, hospitals are calling on Congress for more relief, claiming a $957 million reduction would hurt their charity care operations. This simply does not align with reality.
Evidence shows any increase in the uninsured rate is likely to be temporary. On top of that, hospital profits have hit record highs post-pandemic, and all of this while evidence shows that hospital charity care spending doesn’t grow even as profits do, and hospitals frequently send bill collectors after patients who qualify for charity care. Policymakers should not simply bail out hospitals from the very statutory payment reductions said hospitals had agreed to. Instead, Congress should firmly close the door on more handouts to hospitals that don’t need them.