AHA Information On Underpayments and Uncompensated Care

By December 16, 2009Commentary

One reason hospitals and other providers have been supportive of those aspects of reform designed to extend coverage to the uninsured is a desire to reduce their exposure to delivery of care to these persons, care for which they are often not compensated.  On the other hand, providers have been concerned about proposals to pay for reform by reducing Medicare and/or Medicaid payments, because the providers believe that those payments often do not cover the costs of delivering care to the beneficiaries of those programs.  The American Hospital Association has released results from its latest survey of uncompensated care and underpayments.  (AHA Release)

The survey covered 5010 hospitals, which reported $36.4 billion in uncompensated care costs for 2008.  This is purportedly the actual cost to the hospitals for delivering the care, not what they would have charged.  This amounts to 5.8% of total hospital expenses.  While lower than the percent through much of the 1980s and 1990s, the trend is upward toward those previous highs.  Medicare and Medicaid account for about 55% of hospital care.  The AHA survey estimates that underpayments by the two programs was $32.4 billion in 2008, two-thirds attributable to Medicare.  Medicare is said to pay only 91 cents of each dollar of cost and Medicaid 89 cents.  The rate of underpayment has increased significantly in the 2000s.

Interestingly, about 53% of hospitals report receiving Medicare payments less than cost and about 56%, Medicaid payments below the cost of care.  This suggests that about half of the hospitals are in fact either breaking even or making money on patients covered by these programs.  It may be that these hospitals are more efficient in their delivery of care or that they skimp on what they deliver to these patients in order to not lose money.  It would be useful to have more research on that aspect of the issue.  Another important observation is that if in fact hospitals have this level of uncompensated costs and underpayment, it must cause a substantial increase in the level of payments from private health insurance.

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