Opinion: Overstating the Benefits of Healthcare Reform on Hospital Bad Debt

Full implementation of the Patient Protection and Affordable Care Act will reduce uncompensated care, a report released last month by the Minnesota Department of Health has found.

Unfortunately the report, “Implementation of the Affordable Care Act in Minnesota: Preliminary Projections of Reductions in Uncompensated Care by 2016,” throws out data for PR effect rather than as thoughtful analysis. Many of the conclusions fall short of making sense.

For example:

“Without implementation of the ACA, hospital-based uncompensated care is likely to continue to grow because of a number of factors including: (1) projected further growth in health care costs; (2) population growth; (3) likely growth in insurance products that shift a greater share of costs to patients in the form of increased cost sharing; and (4) factors related to ACA requirements that incent hospitals to provide community benefits [emphasis mine].” But if there was no ACA, those requirements in number four would not exist.

The report employs some very shaky math to demonstrate how hospital uncompensated care without the ACA in 2016, the year when the health insurance exchange in Minnesota is expected to have reached mature enrollment, is projected to increase to between $319 million and $411 million. Those are big numbers, but more accurate analysis would be to describe percentages of those respective range of increases, which is 10 million (3 percent) and 100 million (24 percent).

Thanks to the ACA, more individuals will be insured and as a result uncompensated care will decrease, the report states. This could have been said in one sentence and I doubt anyone would disagree with that conclusion. But the data does expose a large area of risk where all healthcare providers should begin preparing. This statement in particular caught my eye: ”Nearly half of uncompensated care (44 percent or $135 million in 2011) is provided by hospitals on behalf of insured patients.” The report adds this additional breakdown, “Much of the uncompensated care costs for insured patients (41 percent) is for charity care, with the remainder accounted for by bad debt.”

Again, with a little math and using data from the report, one can calculate that of all bad debt expense ($156 million in 2011), more than one-half came (51 percent or $80 million) came from insured patients.

The conclusion I would draw is that uncompensated care will decline, but the number of patients contained within uncompensated care pool will not. And while a greater number of patients unwilling or unable to pay for their healthcare will now have some insurance, healthcare providers can expect that the number of delinquent accounts sliding into bad debt will not decrease. If a provider is sending 100,000 bills per year to collections, under healthcare reform that is unlikely to decrease. The administrative expense will be the same (or more likely grow as populations served increase).

The authors of this report don’t even come close to those conclusions because the analysis they conducted had an ulterior motive. At the end the authors expose what they are selling: The Minnesota Basic Health Plan, which expands subsidized insurance to individuals between 133 percent and 200 percent of federal poverty guidelines. Yes, if more patients are insured, uncompensated care will fall because those costs are shifted, dollar for dollar, onto the taxpayer. Again, that could have been said in a sentence. Analysis to promote an agenda is propaganda, and should be beneath a state agency.