‘Hidden Health Care Tax’ Costs Missouri Businesses Billions Annually. Costs Will Explode Without Medicaid Reform.

‘Hidden Health Care Tax’ Costs Missouri Businesses Billions Annually Costs Will Explode Without Medicaid Reform

JEFFERSON CITY, Mo. — Without Medicaid reform, the cost of providing care to the state’s uninsured at Missouri’s hospitals could nearly triple to $3.5 billion annually by 2019. These costs will be largely shifted to businesses and individuals who purchase commercial insurance coverage, which constitutes a “hidden health care tax” on health insurance. A new report from the Missouri Hospital Association explains how and why significant increases in the cost to individuals and businesses will occur in the absence of Medicaid reform.

“Hospitals will experience $4.2 billion in cuts between 2013 and 2020,” said Herb B. Kuhn, MHA president and CEO. “Without additional Medicaid coverage, hospitals will continue to experience a high level of uncompensated care and fewer dollars to provide that care.”

Although the uninsured account for a relatively small share of hospital utilization, they account for a disproportionate share of the uncompensated costs that hospitals must make up through various means. Hospitals treating Medicare and Medicaid patients in Missouri also are reimbursed less than the cost of providing care. For uninsured patients and patients with high deductible health insurance plans who can’t afford to pay their deductibles, hospitals often receive little or no compensation.

Underpayment for care provided by government programs and the cost of the uninsured are offset by payments from commercial insurance payers that exceed the cost of care. As a result, individuals and businesses subsidize the cost of these programs and the uninsured. These subsidies — shifting costs from one set of patients to another — constitute a “hidden health care tax” on commercial premiums.

The Affordable Care Act reduced hospital payments through a series of cuts to Medicare and scaled back federal payments to hospitals to help offset the cost of the uninsured. These reductions were made with the expectation that hospitals would see new revenue from patients newly covered by Medicaid and those purchasing insurance through a health insurance exchange. However, in June 2012, the U.S.

Supreme Court ruled that the mandate to expand Medicaid was optional for states. The decision placed the delicate balance between payment cuts and new revenue included in the ACA in the hands of state lawmakers.

Without the additional coverage for the working poor included in the ACA, Missouri will continue to experience a large percentage of uninsured citizens. Because of the cuts to hospital payments, the cost of providing care to these Missourians will be shifted to the insured.

The trend in uncompensated care is alarming. Growth in uncompensated care exceeded 90 percent between 2002 and 2011. Throughout the past decade, Missouri’s hospitals provided $10.5 billion in uncompensated care. In 2011, Missouri hospitals provided $1.3 billion in uncompensated care.

Without Medicaid reform, uncompensated care costs could grow to $3.5 billion annually by 2019. Medicaid reform in Missouri would help offset much of the expected growth in uncompensated care costs between 2014 and 2019.

“Cuts to hospitals through the Affordable Care Act and subsequent legislation will significantly reduce hospitals’ ability to provide uncompensated care at the present level,” Kuhn said. “Providing $3.5 billion in uncompensated care would be impossible without unprecedented cost shifting to individuals with commercial insurance.”

Cost shifting could significantly increase the burden on Missouri businesses and individuals. After accounting for the cost of the “hidden health care tax,” annual net earnings for the average privately insured Missourian was $370 lower in 2011 than 2002. However, the decision to reform Medicaid could reduce the “hidden health care tax” burden.

“Cost shifting doesn’t increase the quality or efficiency of health care,” Kuhn said. “And, it is the poorest choice for managing the costs of health insurance for businesses and individuals. “Missouri has a stark choice. If we reform Medicaid, we can reduce the ‘hidden health care tax’ and allow Missouri business to decrease costs and Missouri workers to keep more of their earnings. If we fail to reform Medicaid, we will see the costs of the uninsured explode. Missouri businesses will struggle to remain competitive, and individuals will pay more for their insurance.”

The Missouri Hospital Association is a notforprofit association in Jefferson City that represents 152 Missouri hospitals. In addition to representation and advocacy on behalf of its membership, the association offers continuing education programs on current health care topics and seeks to educate the public, as well as legislative representatives, about health care issues.

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