Fitch: U.S. Federal Budget Proposal Could Pressure Hospitals

NEW YORK--(BUSINESS WIRE)-- Fitch believes that the House of Representative's federal budget proposal published this week, if enacted in its current form, would pressure the credit ratings of not-for-profit hospital and healthcare system. This proposal was authored by House Budget Committee Chairman Paul Ryan, a Republican from Wisconsin.

The budget proposes making several significant changes to Medicare and Medicaid. It would raise the Medicare eligibility age to 67, cap Medicare spending, and offer a set amount to be directed to private health insurance companies for those who turn 65 after 2023. It would also reduce spending on Medicaid and the Children's Health Insurance Program (CHIP) from the current level of 2% of GDP to 1% in 2030.

While the proposed block grant provision of Medicaid grants may provide greater flexibility to tailor specific health programs and service packages, there is the potential to use federal Medicaid grants for non-acute services. We believe that this would have a significant impact on the vast majority of hospitals - for profit and not-for-profit - in the country.

Fitch believes safety net hospitals and children's hospitals are particularly vulnerable due to their historically high volumes of Medicaid and uninsured patients. Safety net hospitals can have upwards of 50% Medicaid and uninsured patients overall and over 70% for outpatient services. Children's hospitals generally have 50%-80% Medicaid or uninsured patients overall.

The impact on stand-alone acute care hospitals and larger health care systems is likely to be contingent on the level of Medicare volume and the disposition of certain programs and payment adjustments within the Medicare program for Direct Graduate Medical Education, inpatient outlier costs and assistance to Medicare-dependent hospitals.

Additional information is available on www.fitchratings.com

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.

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KEYWORDS:   United States  North America  New York

INDUSTRY KEYWORDS:   Health  Hospitals  Professional Services  Finance  Insurance

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