Medicaid expansion cuts down charity care

A new report from Crowe Horwath finds that the shift in coverage brought about by the Affordable Care Act (ACA) has led to more hospitals cost-shifting financial risk to patients.

"Financial risk is shifting from uninsured self-pay patients to insured self-pay patients, many of whom have enrolled in high-deductible health plans," wrote Crowe Horwath executives Cory Herendeen and Daniel Wallace. Medicaid expansion has played a significant role in dramatically reducing uncompensated care.

Nearly 57 percent of uncompensated care dollars in states that expanded Medicaid eligibility under the ACA are coming from copays and deductibles from patients with insurance coverage,
according to their research. And overall, charity care was down 36.6 percent in hospitals last year that expanded Medicaid since the enactment of the ACA.

Meanwhile, inpatient admissions increased 3.6 percent in nonexpansion states between September 2014 and last September, while decreasing 1.4 percent for expansion states, suggesting another possibility where hospitals deliver less charity care.

Although not-for-profit hospitals are under pressure to provide more charity care, some still hedge on offering it. A recent study by the University of Michigan concluded that only 29 percent offer uninsured patients discounts that match those negotiated by commercial insurers or the Medicare program. And only 42 percent notify patients about their eligibility for charity care prior to trying to collect payment for their bills. That's despite the fact that the Internal Revenue Service late last year issued new guidelines for charity care and patient financial interactions.

As a result of this shift, and while "there are no definitive community benefit thresholds required by the IRS or CMS at this time, hospitals in Medicaid expansion states must be mindful of increased regulatory scrutiny in light of the declining charity rates," according to the report. Herendeen and Wallace suggest that hospitals annually review the hospital's charity care and financial assistance policies, and maintain supporting documentation for each cost report period."

To learn more:
- read the Crowe Horwath article
- download the report

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