In merely four years, Ohio hospitals have seen Medicaid payments through state-funded managed care programs triple, rising from $835 million in 2007 to $2.36 billion in 2011. Meanwhile, during the same period, the number of patients covered by private insurance plans has dropped. Hospitals are concerned about these numbers, given the fact that Ohio budget cuts have resulted in the hospitals receiving about 82 cents for every dollar spent on the care of patients covered by Medicaid.
Before the cuts, the hospitals were receiving 95 cents per dollar spent on Medicaid patients, and the deficit was covered by charging inflated prices to private insurers, also known as “cost shifting”. Those inflated charges also covered the cost of care for uninsured persons who were provided with emergency room care, as required by the federal Emergency Medical Treatment and Active Labor Act (EMTALA). This is a particular problem for Ohio hospitals, which receive 34 percent more emergency room visits than the national average. The greater the losses hospitals incur from treating Medicaid and uninsured patients, the more hospitals feel pressured to increase charges to privately insured patients and pass on the burden of the loss.
As the number of privately insured patients declines and the number of Medicaid and uninsured patients increases, hospitals are becoming increasingly worried about how to cope with the losses they incur. According to the Columbus Dispatch, “even a 1 percent shift in revenue from more profitable private-pay sources to Medicaid can have significant consequences for a hospital or health system.” The article gives an example of one Ohio hospital that lost more than $50 million per year between 2007 – 2011 due to a 3 percent shift from private payers to Medicaid reimbursement.
Especially at risk are Ohio children’s hospitals, where more than half of the patients treated are covered by the Medicaid program. A report issued by the Ohio Children’s Hospital Association concludes that significant increases in public sector funding for Medicaid reimbursement are necessary for hospitals to maintain the quality and cost of care that is currently being provided.
Increasing the hospitals’ anxiety are the state health care insurance exchanges, which are required to go into effect in 2014 under the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148). While the implementation of the exchanges will sharply decrease the number of uninsured persons, it is expected that many of the newly insured patients will be covered by the expanded Medicaid program. As more patients are provided with care below cost, many experts expect that private insurance coverage will continue to decline as employers cease to provide health care benefits to employees.
A possible result? The cost of private insurance continuing to rise, causing even more employers to drop coverage for employees, forcing more of them on the public Medicaid rolls.