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Wyoming charity care concerns not easily fixed by Medicaid

By   /   March 2, 2016  /   News  /   No Comments

Part 4 of 8 in the series Measuring Uncompensated Care

Wyoming hospitals want the state to expand Medicaid to help with uncompensated care costs, but a large portion of those costs are a result of underpyaments by the state’s existing Medicaid program.

Uncompensated care is generally broken down into three categories: charity care provided to the poor, bad debt from patients’ unpaid bills, and “unreimbursed Medicaid” — the difference between the cost of caring for Medicaid patients and the amount Medicaid pays hospitals.

The Wyoming Department of Health tracks Medicare underpayments as uncompensated care costs, as well. Of all these forms of uncompensated care, charity care is typically the smallest cost for hospitals.

A 2015 Wyoming Legislative Service Office (LSO) survey of hospitals found that only 7 percent of Wyoming hospitals’ uncompensated care costs were the result of charity care.

WY-uncompensated-care-2015

Why is charity care so much less of a burden for Wyoming’s hospitals than underpayments from Medicare and Medicaid, two of the largest government spending programs in America? Because Medicare and Medicaid systematically pay less for care than private health insurance plans do.

In the same LSO survey, hospitals reported that patients with private insurance paid, on average, 73 percent of billed costs for the care they received, while Medicare paid an average of 64 percent and Medicaid paid an average of 49 percent.

An LSO review of hospital spending data found that just 8.1 percent of Wyoming hospitals’ operating expenses resulted from charity care, unreimbursed Medicaid, and bad debt in 2013.

Wyoming Medical Center, a nonprofit located in Casper, in 2013 reported $11 million in charity care costs, $4.2 million in unreimbursed Medicaid costs, and $28.4 million in bad debt — essentially bills that go unpaid — but still finished the year with $11.5 million more in revenue than expenses.

Despite the fact Medicaid underpays for the services hospitals provide, the Wyoming Hospital Association wants the state to implement the 2010 federal health law’s optional Medicaid expansion and add an estimated 17,600 adults to the program.

No one from the hospital group responded to Watchdog’s questions about how Obamacare’s Medicaid expansion would affect members’ uncompensated care costs.

In a 2013 Casper Star Tribune op-ed, former WHA president Dan Perdue encouraged the legislature to expand Medicaid to help hospitals weather “the dramatic growth in uncompensated care” and Obamacare’s cuts to federal charity care funding.

The scheduled Disproportionate Share Hospital program cuts have been delayed after furious lobbying at the national level by the hospital industry, but Obamacare advocates have successfully used the threat of DSH cuts to secure Medicaid expansion in other states.

In those states, the entire cost of exploding Obamacare expansion enrollment will be borne by federal taxpayers through the end of this year. Starting in 2017, states will have to pay 5 percent of Obamacare expansion’s benefit costs, increasing to 10 percent by 2020.

Hospitals hope to reduce their charity care and bad debt costs by putting more people on Medicaid. But, in a game of medical whack-a-mole, expanding Medicaid will also increase unreimbursed Medicaid costs. And those unreinbursed costs will grow even more if states are forced to cut reimbursement rates to make ends meet after the federal subsidy is reduced.

That’s a situation Wyoming should avoid, said Charles Katebi, a health care policy analyst at the free-market Wyoming Liberty Group.

“Medicaid actively contributes to the uncompensated care problem. The state department of health says as much,” Katebi told Watchdog.org.

“In Wyoming there are roughly 5,000 individuals currently purchasing health care through Obamacare’s insurance subsidies that would be potentially eligible for Medicaid expansion,” he added. “If Medicaid expands, they will lose their subsidies and have to go onto Medicaid for coverage.”

Before Obamacare’s federally subsidized health insurance plans were available to Americans with income at or above 100 percent of the poverty line, actuarial firm Milliman estimated the Obamacare expansion would bump 4,600 Wyoming residents from private insurance plans into Medicaid.

State lawmakers approved a taxpayer-funded bailout to address hospitals’ uncompensated care costs in 2015, but the Wyoming Hospital Association sees Obamacare expansion as a long-term solution.

“From a hospital perspective, we’ve got to find something to stem the bleeding,” WHA president Eric Boley told K2 Radio in an interview last month, after Republican legislators rejected GOP Gov. Matt Mead’s latest attempt to expand Medicaid in Wyoming.

Katebi said that’s a bad gambit for hospitals.

“Hospitals could see their uncompensated care numbers increase substantially if patients go from using private insurance that covers the cost of their care to Medicaid that pays them below cost,” he said.

Part of 8 in the series Measuring Uncompensated Care

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Jason was formerly a reporter for Watchdog.org