Medicaid provisions in the American Health Care Act could significantly impact the bottom line for safety-net hospitals, according to a new analysis.
The Commonwealth Fund projected that total revenue for safety-net hospitals between 2017 and 2026 under current healthcare laws would likely be $2.29 trillion and costs would be $2.22 trillion, accounting for about $74 million in net income.
If the changes to Medicaid in the House version of the GOP plan to repeal and replace the Affordable Care Act were enacted, revenue to safety-net hospitals would decrease by $36.5 billion and expenses would drop by $18.3 billion. This would leave an $18.3 billion net loss in income, about 24%, according to the analysis.
The elimination of the individual mandate and federal spending reductions in Medicaid will leave fewer people enrolled in Medicaid, but some of those patients will use less hospital care, accounting for the decrease in costs.
“Under the AHCA, beginning in 2020, the financial status of safety-net hospitals could deteriorate year over year as Medicaid coverage is reduced and the effect of the Medicaid per-capita spending limits grows,” according to the report.
The changes to Medicaid outlined in the AHCA would also compound over time, hitting safety-net hospitals harder in different windows, the Commonwealth Fund estimated.
An estimated 5 million people would lose Medicaid coverage between 2017 and 2020, but between 2020 and 2026 an estimated 12 million would lose coverage. Safety-net hospitals could see their margins decline consistently between 2018 and 2025, as Medicaid disproportionate-share hospital payments decrease.
Those reductions end in 2026, so margins could increase between 2025 and 2026, according to the report.
Safety-net facilities in expansion states are likely to feel the burden the most, according to the report. Uncompensated care costs for the 423 safety-net facilities in those states is about $13,500 under current law; under the AHCA, it would jump to more than $28,000, an increase of 110%.
Proposed cuts to Medicaid in both the AHCA and the Senate’s Better Care Reconciliation Act have drawn sharp criticism from provider groups. The Congressional Budget Office estimated that the Senate’s bill would cut federal Medicaid spending by 35% by the year 2036.