Hospitals' Uncompensated Care Costs Will Decline $5.7 Billion

The Affordable Care Act (ACA) will save hospitals a projected $5.7 billion in uncompensated care this year, according to a report released by HHS. Roughly three-quarters of those savings are coming from Medicaid expansion states.

With the uninsured rate at historic lows as a result of the ACA, uncompensated care in hospitals and emergency departments (ED) is down substantially in the last year, according to HHS.

“Early hospital financial reporting and member surveys from hospital associations indicate that payor mix is shifting and uncompensated care is declining through second quarter 2014,” authors Thomas DeLeire, Karen Joynt, and Ruth McDonald, wrote in the report. “Volumes of uninsured/self-pay admissions and ED visits (which are major drivers of uncompensated care) have fallen substantially, but particularly in Medicaid expansion states.”

In 2012, hospital uncompensated care costs totaled between $46 and $51 billion, according to the American Hospital Association. These costs are largely federally funded through Medicaid, Medicare, the Veterans Health Administration, the Indian Health Service, community health center funding, and Ryan White funding for people with HIV/AIDs.

According to the report, the federal government pays for an estimated 62% of uncompensated care. Since it was expected that the ACA would lead to a decline in uncompensated care costs, the healthcare law enacts reductions in the Medicaid and Medicare reimbursements that help offset those costs.

Overall, hospitals in Medicaid expansion states will save $4.2 billion (74% of the total savings nationally) in 2014, while hospitals in states that chose not to expand Medicaid will save $1.5 billion (26% of the national total savings). New Hampshire and Pennsylvania were excluded because even though they decided to expand Medicaid, they had not yet started enrolling patients by the end of the second quarter.

“Hospitals have long been on the front lines of caring for the uninsured, who often cannot pay the full costs of their care,” HHS Secretary M. Sylvia Burwell, said in a statement. “Today’s news is good for families, businesses, and taxpayers alike. It’s yet another example of how the Affordable Care Act is working in terms of affordability, access, and quality.”