Health care’s $85 billion challenge – uncompensated care in the Obamacare age


(Noah Berger/Bloomberg News)

Welcome to Health Reform Watch, Jason Millman's regular look at how the Affordable Care Act is changing the American health-care system — and being changed by it. You can reach Jason with questions, comments and suggestions here. Check back every Monday, Wednesday and Friday afternoon for the latest edition, or sign up here to receive it straight from your inbox. Read previous columns here.

A Monday morning survey showed a steady decrease in the uninsured rate since Obamacare's insurance marketplaces opened, but tens of millions will remain uninsured. And a separate study Monday showed just how much it could cost to care for them.

Health-care providers faced $74.9 billion to $84.9 billion in care costs for the uninsured and people who struggled to pay their medical bills, according to new estimates published in the journal Health Affairs. Using the lower of the two estimates, Urban Institute researchers calculated that hospitals provided $44.6 billion of the uncompensated care, publicly supported community providers delivered $19.8 billion, and office-based physicians provided about $10.8 billion.

The federal government and states have programs in place to help health-care providers offset those costs. In all, Institute researchers estimate the government paid $52.6 billion toward uncompensated care last year, or around two-thirds of the total burden.

Even if the Affordable Care Act hits its coverage goals, between 25 million and 30 million people will still lack insurance. There's still clearly a need to address uncompensated care, but you would expect there will be less of it going forward as millions more gain insurance.

The ACA anticipates just that, including reductions to programs that help pay for uncompensated care. Some of the most notable cuts outlined in in the law are to what's known as Disproportionate Share Hospital payments under the Medicare and Medicaid programs. These safety-net hospitals are expecting to see a total $22.1 billion cut to Medicare DSH payments between fiscal 2014 and 2019, and the ACA originally called for $17.1 billion in cuts to the Medicaid DSH program through 2020.

Washington is already feeling the pressure to push back Medicaid DSH cuts. Congress first delayed the cuts two years until fiscal  2016, and President Obama last month signed legislation that delayed the cuts again until fiscal 2017. Meanwhile, hospital groups have been trying to build support for a bill that would delay DSH cuts in the Medicare program by two years.

In their report, Urban Institute  researchers caution policymakers and the health-care industry to closely watch how hospitals and states react to reduced government support for uncompensated care. The issue could be more prominent in states that haven't expanded their Medicaid program, since they'll have more uninsured people than the ACA drafters expected.

The history of the 2006 Massachusetts law expanding coverage also shows that there's an ongoing need to support safety-net care providers, who typically provide the largest share of uncompensated care. Those providers, including community health center and hospitals, saw increases in patient visits following the state's coverage expansion, concluded George Washington University researchers in a 2011 study.

The takeaway from that study: "It will continue to be important to support safety-net providers, even after health-care reform programs are established," the authors wrote. It's evident that there will be continued pressure to stave off the ACA's provider cuts, if at least to better understand how the law's new coverage scheme is playing out.

Top health policy reads from around the Web:

Who should get a really expensive hepatitis C drug? "If all 3 million people estimated to be infected with the virus in America are treated at an average cost of $100,000 each, the amount the U.S. spends on prescription drugs would double, from about $300 billion in one year to more than $600 billion. That prospect has inspired an unusually blunt public debate: Should expensive treatments — one new drug costs $1,000 a pill — be limited only to the sickest patients, or is it appropriate to treat all who want the drugs immediately? And should those in taxpayer-funded programs have the same access?" Julie Appleby in Kaiser Health News.

More trouble for Oregon's exchange. "The Federal Bureau of Investigation is looking into problems that plagued Oregon's implementation of the Affordable Care Act, after the state was forced to scrap its problematic health insurance exchange that was never fully functional, according to people familiar with the investigation. The FBI has already interviewed some individuals as part of their inquiry." Damian Palette and Devlin Barrett in the Wall Street Journal.

Obamacare makes for weird N.C. politics. "[Sen. Kay] Hagan herself is a supporter of the health-care law, but she is taking the unusual step of spending money on advertisements designed to appeal to Republican voters skeptical of the measure. The maneuver is apparently intended to undermine enthusiasm in the GOP base for the Republican who is seen as her strongest potential challenger in November." Rosalind S. Helderman in The Washington Post.

Jason Millman covers all things health policy, with a focus on Obamacare implementation. He previously covered health policy for Politico.
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