Rich Daly | February 16, 2015
Even with an adverse ruling, hospitals would continue to face planned cuts in uncompensated care reimbursement and reductions in future rate increases.
Feb. 16—A possible ruling against the legality of subsidies for enrollees in federally operated health insurance marketplaces could take a big toll on hospital finances, according to a new analysis.
The analysis released this week by the liberal-leaning Urban Institute estimated that a U.S. Supreme Court decision against continuing the subsidies could reduce total spending on hospital care in 2016 by $6.3 billion, and potentially put $3.8 billion more at risk as well.
The analysis is based on potential outcomes in the case King v. Burwell, which the court is considering and expected to decide on in June.
The hospital financial impact would stem from the loss of insurance by an estimated 8.2 million enrollees whom the researchers project could no longer afford to buy coverage in the 38 federally operated exchanges if their subsidies are eliminated. The court will decide whether language in the Affordable Care Act (ACA) limits the provision of subsidies to enrollees in states that run their own exchanges.
The researchers concluded that the loss of coverage would take a particularly large financial toll on hospitals—compared with other providers—because they face ongoing cuts in uncompensated care assistance under the ACA. The law’s supporters justified the cuts as likely to be offset by a large reduction in the number of charity care patients after the law’s coverage expansions were enacted.
The Obama administration has refused to discuss whether it has a contingency plan if the subsidies are struck down, and some legal experts believe states could quickly implement workarounds that would allow the subsidies to continue.
But hospital advocates have raised alarms in amicus filings with the court about the adverse financial effects to their member organizations from any elimination of the subsidies.
Congressional Republicans said they are formulating contingency legislation to address the loss of subsidies.
Hospital Impact Detailed
The Urban Institute authors conclude that the 8.2 million people facing a loss of insurance if the subsidies are struck down will spend an estimated $11.1 billion on hospital care in 2016, under current law. However, if they can no longer afford to buy coverage and thus become uninsured, they would spend $1.1 billion directly with another $3.8 billion in services provided as uncompensated care.
“Consequently, hospital revenues would decline in the affected states; the largest decreases would occur for hospitals that serve a large share of low- and moderate-income patients, but all hospitals would be affected financially in some way,” the analysts wrote.
About 39 percent of uncompensated care was funded by the federal government through programs such as Medicaid and Medicare DSH payments, 24 percent was funded by state and local governments, and the remaining 37 percent was funded by healthcare providers, according to a 2013 uncompensated care study cited in the Urban Institute report.
From 2013 through 2022, the ACA will cut Medicaid DSH funds by $22 billion and Medicare DSH funds by $34 billion, according to the nonpartisan Congressional Budget Office. Medicaid DSH cuts scheduled for FY14 were delayed until Oct. 1, 2015, but also were doubled to $1.2 billion.
In addition, the ACA’s reductions in future increases to Medicare fee-for-service hospital payments are expected to reduce payments by $260 billion during the same 10-year period.
Overall, a decision striking down subsidies would cut healthcare spending on hospitals, physicians, prescription drugs, and other areas by $9.7 billion in 2016 and $112 billion over 10 years.
Source: HFMA
https://www.hfma.org/Content.aspx?id=28438