Preparing for an ACA Rollback: How to Get Paid for Treating the Uninsured

Hospital Industry Viewpoint

November 10, 2016

Given that Republicans will soon control both Congress and the White House, hospitals may be concerned that expenditures that have helped reduce the ranks of the uninsured will be ratcheted down. However, forward-thinking hospitals have opportunities to protect or even increase their reimbursement for treating the uninsured.

As the surprise of the election results subsides, hospitals will begin to consider how the election will affect them financially. While much remains to be learned regarding the Trump administration’s healthcare policy positions, one central platform was repealing “ObamaCare” (officially, the Affordable Care Act [ACA]). With the Republican Party in control of both houses of Congress and the Executive Branch, there is a good probability that at least portions of ObamaCare will be repealed. The remaining questions are, what is likely to get repealed? And, where do the silver-lining opportunities for hospitals remain?

What does it mean to repeal ObamaCare?

As hospitals know very well, ObamaCare is a far-reaching piece of legislation best known for creating the healthcare exchanges, but it also made significant shifts in Medicare reimbursement. The legislation created payment policies pertaining to readmissions, value-based purchasing, and hospital-acquired conditions, as well as paved the way for accountable care organizations (ACOs). ObamaCare also established the Center for Medicare and Medicaid Innovation (CMMI). Finally, the legislation mandated the expansion of Medicaid programs (although this was later made optional by a US Supreme Court ruling). Of these many facets, only some provisions reflect substantial governmental outflows. The healthcare exchanges, in particular, require funding because of the tax incentives used to encourage purchasing insurance on the exchanges. Medicaid expansion also creates federal, as well as state, obligations. Many of the remaining items represent cost savings and the zeitgeist of payment for value. They are therefore unlikely to be repealed, even by the new administration.

What will replace the health exchanges, CMMI, and Medicaid expansion?

The Trump campaign has furnished glimmers of insight into what its administration’s priorities may be. There has been mention of trying to create a national insurance market not beholden to state laws, which will allow an individual in Hawaii to purchase insurance from an insurer in New Jersey. While attracting less attention during the campaign, the Republican platform has historically favored block grants to the states, rather than the centralized Medicaid expansion program. A Trump administration may very well support such a legislative change.

How does any of this create an opportunity for hospitals?

Although each of these potential developments could increase the ranks of the uninsured, hospitals that act early may be able to take certain protective measures or even act proactively. Without the carrots and the sticks encouraging patients to purchase health insurance on the exchanges, it is not too difficult to envision that the number of uninsured people will likely increase. Although generally that situation is not a favorable outcome for hospitals, it will, however, result in an increase in disproportionate share hospital (DSH) payments, which are tied to the percentage of the population that is uninsured. Hospitals need to make sure that they are properly collecting and reporting their data on uncompensated care costs to ensure that they receive the maximum DSH amounts to which they are entitled.

It would also be fair to ask Congress to allocate the funds that would otherwise be used for tax incentives to create an indigent care pool that would pay hospitals directly for the care they furnish. Such a measure would make sure that healthcare providers get 100% of the funding rather than cycling it through insurers—effectively, cutting out the middle man. However, this option would take a coordinated effort between many hospitals and hospital associations.

Finally, should Medicaid expansion be replaced with block grants, hospitals stand to benefit in many ways. Several states have recently tested Medicaid demonstration programs (often referred to as Delivery System Reform Incentive Payments, or DSRIP). Hospitals should learn from these programs or from the experience of participating in ACOs how to create models for treating the uninsured that can then be presented to state leaders. Indeed, if hospitals can develop well-designed healthcare funding programs with risk-sharing and quality metric features, states will likely champion these programs with CMS, possibly resulting in a payment stream that is even more under hospital control than fee-for-service Medicaid.

What are the immediate items on the hospital’s checklist in light of the above?

  • Hospitals should reconsider whether they have claimed all the uncompensated care costs that they can on Worksheet S-10 of their cost reports.
  • Hospitals should consider how they can add value in state healthcare systems by taking greater control over the health of Medicaid and indigent patients. Doing so will allow them to make the case that they should be entitled to a portion of any block funding that may become available.
  • Hospitals should make sure that their trade associations begin having discussions now about why tax incentives for uninsured patients should become direct payments to hospitals for care of the indigent.

The work on each of these activities should begin quickly, as it is more advantageous for hospitals to have a say in shaping policy, rather than in simply reacting to it.

Albert W. Shay
Jacob J. Harper