GAO: Hospitals likely receive overpayments from uncompensated care programs


Payments the federal government makes to hospitals for uncompensated care aren't based on the actual costs of delivering such services, according to a new Government Accountability Office report.

The GAO calls this a “misalignment” and suggests that it may cost the Medicaid and Medicare programs billions of dollars a year in overpayments. Altogether, the two programs pay hospitals about $50 billion a year in combined uncompensated care payments.

Acute care providers spent an estimated $42.8 billion on uncompensated care in 2014, according to the American Hospital Association. That figure has since been trimmed by the expansion of Medicaid eligibility as part of the Affordable Care Act.

“Payments are largely based on hospitals' Medicaid workload rather than actual hospital uncompensated care costs. Centers for Medicare & Medicaid Services (CMS) officials acknowledge this could result in payments not aligned with uncompensated costs, particularly in states that have expanded Medicaid resulting in fewer uninsured individuals and lower uncompensated costs,” the report said.

The report also noted that hospitals can be compensated more than once for uncompensated care delivery from overlapping programs that cover aged, blind and disabled patients, dual-eligible Medicare/Medicaid patients, and other programs.

Moreover, not-for-profit hospitals are also able to claim tax benefits for uncompensated care costs for which they're already being reimbursed, which total about $13 billion a year. That practice costs taxpayers “billions of dollars” annually, according to the GAO. Hospitals have also accused the feds of undercounting uncompensated care patients and underpaying them as a result.

The GAO recommended that “transitioning away from using Medicaid patient days and instead basing Medicare uncompensated care payments on data showing actual hospital uncompensated care costs, would result in a better alignment of Medicare UC payments with actual hospital uncompensated care costs."

- read the GAO report