Obamacare Slashes Uncompensated Care by 47%

New data from the Wisconsin Hospital Association show that the federal health care reform law has had the desired effect of causing a sharp drop in uncompensated care. That’s great news because much of the cost of uncompensated care for people who are uninsured gets shifted to other patients and contributes to higher rates for people with insurance.

The reduced spending for uncompensated care – which is the total of charity care and bad debt – also has the benefit of creating a great opportunity for hospitals to make upstream investments that promote public health and alleviate some of the factors causing severe health disparities.

The new data demonstrate that uncompensated care expenses borne by Wisconsin hospitals have dropped precipitously since 2013, as key parts of the Affordable Care Act (ACA) were being implemented – including the new insurance Marketplace and the expansion of coverage for childless adults. After those provisions had been in place for two years, total uncompensated care fell in Wisconsin by $534 million in fiscal year 2015, a drop of 36.8 percent from the 2013 level.

The sharp decline in uncompensated care is even more precipitous when measured relative to total patient revenue. As the bar graph illustrates, uncompensated care fell from 3.6 percent of patient revenue in fiscal years 2012 and 2013 to 1.9 percent last year, which is a drop of about 47 percent.

Another way to measure uncompensated care, which many advocates prefer, is to use actual costs rather than hospital charges. Using that method, the dollar amounts are much smaller, but the percentage change is comparable. Based on costs, total uncompensated fell by almost $217 million over the last two years, a decline of 38.1 percent.

The rapid drop in hospitals’ uncompensated care costs is almost the same as the drop in uninsured Wisconsinites, which fell by 37.6 percent from 2013 to 2015. That correlation is one of the reasons why state policymakers should not be satisfied that there are still about 323,000 uninsured people in our state.

As I noted in a recent blog post about the policy choices lawmakers face next year, our state still has some work to do to catch up to two neighboring states with lower uninsured rates. If we lowered our 5.7 percent uninsured rate to the 4.5 percent rate in Minnesota, there would be almost 70,000 fewer uninsured Wisconsinites! State policymakers could achieve that goal by removing administrative barriers to participation in BadgerCare and by taking advantage of the federal funding that would pay the full cost of expanding BadgerCare eligibility of adults to 138 percent of the federal poverty level.

Although I think the drop in uncompensated care is great news, it also needs to be noted that nonprofit hospitals, which don’t pay income or property taxes, have both a legal and moral obligation to help people in need in their communities. In light of the 40 percent drop in the charity care portion of uncompensated care over the past two years, hospitals have a wonderful opportunity – as well as an obligation – to find other ways to help meet community needs.

The savings accruing to hospitals from the ACA should enable them to help achieve another objective of health care reform – an increased emphasis on addressing population health issues, including the social determinants of the glaring disparities in health outcomes for low-income families and particularly for communities of color. Some hospitals have begun to make investments that can help alleviate those disparities, but I think that’s an area where health care providers need to be investing far more resources, and it’s an area that also merits more attention from policymakers and advocates.