The choice by many states not to increase Medicaid health insurance for the poor may produce unintentional cuts for hospitals that supply uncompensated care, according to a new study conducted by Vanderbilt University.
John Graves, Ph.D., a Vanderbilt policy expert in the Department of Preventive Medicine and his team used data collected from U.S. hospitals and insurance data in each state to determine reductions in Medicare and Medicaid disproportionate share (DSH) funds paid to approximately three-fourths of U.S. hospitals that attend low-income patients.
The findings, published in the New England Journal of Medicine, laid out numbers to show the influence of funding changes and estimate what the difference would be if Medicaid is or isn’t made larger in each state.
“Expanded insurance through the exchanges alone will trigger lower DSH payments to hospitals. The problem comes in states where much of the uncompensated care provided will remain the same if Medicaid is not expanded, yet DSH cuts will still occur. Hospitals will need to recoup these DSH losses either by providing less uncompensated care, or by shifting the costs onto everyone else.”
With the implementation of the Affordable Care Act (ACA), Medicare DSH reductions will start with a 75 percent complete decrease in 2014 as new insurance exchanges become active nationwide.
To limit the impact of the reductions, the government has created a formula to add some DSH funds back, figured by the number of citizens who are uninsured in each state. However, due to the ruling by the Supreme Court saying that states are not required to expand Medicaid, the number of citizens covered in each state will differ greatly from state to state.
It was found that a few states not increasing Medicaid will be instead proposing coverage to more people in their insurance exchanges, while still not covering the majority of low-income, uninsured people. DSH reductions will still occur in those states, making it extremely hard for hospitals that provide uncompensated care.
On the other hand, Graves also discovered that states that intend to expand Medicaid coverage may end up covering around 60 percent of their uninsured citizens, greatly improving the amount of hospital care covered by private and public insurance companies. This may counteract the cuts in DSH funds.
Texas, Louisiana, and Florida have already said they will not extend Medicaid coverage. These states and two others will undergo the most unplanned DSH reductions, Graves says.
A separate study done earlier this year stated that extending coverage to currently uninsured adults would raise the cost of the program, because those individuals are more likely to have expensive health issues than non-disabled patients who are currently covered under Medicaid.
Written by Kelly Fitzgerald