Study: Adverse decision in King v. Burwell could cost hospitals billions

Should the U.S. Supreme Court invalidate tax subsidies to purchase insurance in more than three dozen states later this year, it would likely have a devastating impact on healthcare spending moving forward, particularly at the hospital level.

That's the conclusion of a new study by the Urban Institute that was funded by the Robert Wood Johnson Foundation. It estimated that some 8.2 million Americans would lose their healthcare coverage as the result of an adverse ruling from the high court, including 445,000 enrollees in the Children's Health Insurance Program and another 300,000 with employer-based coverage. The study also estimated that as many as 1.2 million Americans who purchase individual coverage without subsidies would also drop their coverage because the loss of the others from the risk pool would cause premiums to rise and make their policies unaffordable.

The case, King V. Burwell, pivots on whether wording in the Affordable Care Act (ACA) permits the 38 states that do not operate their own exchanges to allow their residents to use tax subsidies to purchase coverage. Congress could change the wording to make it more straightforward but both of its houses are controlled by Republicans, most of whom oppose the ACA.

Altogether, the study's authors concluded, more than $10 billion could be removed from the healthcare system if the subsidies are eliminated, and overall healthcare spending for the affected group would drop by 35 percent. Hospitals alone would lose about $6.3 billion in revenue--a decline of about 57 percent from this particular group. Moreover, the rates of self-pay patients and uncompensated care would also rise, and could contribute to further erosion of hospital revenues.

"Patterns of financing for uncompensated care in recent years may not continue. If so, an additional $3.8 billion of hospital spending would be at risk," said the report in regard to how the ACA has changed disproportionate share hospital payments.

"This Supreme Court case potentially has far-reaching effects that will extend well beyond those losing coverage, and ripple through the entire industry," said Kathy Hempstead, who directs coverage issues at the Robert Wood Johnson Foundation, in a statement emailed to FierceHealthFinance. "A decision for King will have significant financial impacts, not only for patients, but also for the healthcare delivery system that relies on these patients for revenue."

Last month, the American Hospital Association filed an amicus brief with the Supreme Court, urging it to keep the subsidies in place. The ACA's impact--including the expansion of Medicaid--has cut the hospital sector's uncompensated care costs by $5.7 billion.

To learn more:
- read the Urban Institute report (.pdf)
- check out the key findings