Information released this week by the American Hospital Association (AHA) shows how the worsening economy has taken a toll on U.S. hospitals. 

According to AHA, U.S. hospitals provided $36.4 billion in uncompensated care in 2008, a $2.4 billion increase over 2007.  Uncompensated care is the combination of bad debt (money hospitals expected to receive for care provided but did not) and charity care (money not expected to be received from patients who met the hospital’s guidelines for free care). 

In Iowa hospitals, uncompensated care totaled $709 million in 2008, up from $613 million in 2007. 

Meanwhile, underpayment by Medicare and Medicaid to U.S. hospitals reached $32.4 billion in 2008, up from $31.9 billion in 2007 and $3.8 billion in 2000, respectively.  Medicare reimbursed 91 cents and Medicaid reimbursed 89 cents for every dollar hospitals spent caring for these patients.  In Iowa during 2008, Medicaid losses totaled nearly $178 million, while Medicare losses amounted to $103 million. 

The poor economy and the rising cost of insurance have led to more people becoming uninsured.  Research has shown that for every one percentage point increase in unemployment, 2.5 million people lose their employer-sponsored insurance.  More uninsured people means more spending by hospitals to pay for care for people who cannot pay for it themselves. 

Some of the uninsured qualify for government assistance to pay their medical bills, often through the Medicaid program.  But Medicaid doesn’t pay hospitals for the full cost of care (neither does Medicare, but Medicaid pays even less) and hospitals must cover the difference.  With more people going on Medicaid, that difference is growing larger. 

How does this impact hospitals?  Well, for one thing, the growing demand for charity care and more instances of bad debt makes it harder for hospitals to pay better salaries (it’s well known that Iowa nurses salaries are among the lowest in the nation) that help keep medical professionals (particularly young ones) in the state.  It also makes it harder for hospitals to build reserves that pay for replacing aging equipment and improving services. 

But uncompensated care and underpayment by Medicaid and Medicare also impact individual Iowans, because these costs are shifted to payers who do cover their full cost of care – mainly people who are privately insured.  In Iowa, Wellmark has estimated that 10-15 percent of the dollars it pays to Iowa hospitals and physicians is to compensate for government programs’ shortfall. 

Uncompensated care and underpayment by Medicaid and Medicare are always a challenge for hospitals.  This is why IHA supports efforts to insure more Iowans and more Americans and why IHA has fought to keep the government from cutting Medicare and Medicaid payments.