Uncompensated care to exceed $1 trillion if ACA is repealed

Repealing the ACA would leave millions uninsured — increasing spending on uncompensated care from $656 billion to $1.7 trillion over the next decade, adding significantly to the financial burden for healthcare providers, according to a recent analysis from the Urban Institute, funded by the Robert Wood Johnson Foundation.

The Urban Institute estimated in December 29.8 million people would lose health insurance in 2019 if the ACA is partially repealed. Their estimate uses the budget reconciliation bill passed by Congress last January and vetoed by President Barack Obama as a model for what a potential partial repeal might look like. Because Congress appears ready to pass a similar reconciliation bill this year, the new analysis builds on the assumptions and estimates made in the December report.

Here are the key takeaways from the Urban Institute's latest analysis.

1. The loss of health insurance means fewer people would use healthcare services, and spending on these services would go down. Under the reconciliation model, the Urban Institute estimates spending by payers and consumers on healthcare for the nonelderly population would decline $145.8 billion in 2019. Over the next decade, the Urban Institute estimates this spending would decline by $1.7 trillion.

2. The report notes that a drop in spending on healthcare services means revenue would fall for healthcare providers. Under this analysis, hospitals would take the biggest hit, as spending on hospital services is estimated to decline $596.4 billion between 2019 and 2028. Spending on physician services would decline $217.7 billion, spending on prescription drugs would decline $428.6 billion and spending on other services would decline $416.4 billion over the same time period, according to the report.

3. The healthcare services sought by the newly uninsured would increase uncompensated care costs. Specifically, the Urban Institute estimates uncompensated care costs would increase $88 billion in 2019 alone, and $1.1 trillion from 2019 to 2028. In that time period, $296.1 billion of uncompensated care would be attributed to hospital care, according to the report.

4. Federal funding for uncompensated care would increase slightly under an ACA repeal. Medicare Disproportionate Share Hospital payments increase as the number of uninsured Americans increases. This means if 29.8 million people lost insurance, Medicare DSH payments would automatically increase by $35 billion from 2019 to 2028, according to the report. The ACA did include provisions to cut Medicaid DSH payments, but they were never implemented, so a repeal of those pending cuts would not have an effect, according to the report.

5. The increase in Medicare DSH payments is not nearly enough to offset the increase in uncompensated care. The Urban Institute estimates the increase in Medicare DSH payments would cover less than 4 percent of the increase in uncompensated care. Currently, Congress has not indicated it would increase funding for uncompensated care, according to the report. State and local governments could help foot the bill for charity care, but they would have to allot six times as much funding to uncompensated care to cover the growth in costs entirely, according to the report. This is unlikely, so the Urban Institute predicts the financial burden of increased uncompensated care under an ACA repeal would predominantly fall on providers.

"Partial ACA repeal could lead to a fourfold increase in the amount of uncompensated care providers finance themselves compared to current levels," the report reads. "As a result there would likely be a substantial increase in unmet health care need for the uninsured."

Read more here.

Correction: This article previously stated that the Urban Institute is part of Robert Wood Johnson Foundation. This is incorrect. The institutions are indepedent from one another, and RWJF funded the analysis conducted by the Urban Institute. This article was updated Jan. 6, 2017 at 9:10 a.m. CT to reflect this change. 

More articles on finance:

Hospital stocks climb after hints of 'smooth' ACA repeal
CRFB analysis: Full ACA repeal could cost up to $350 billion
Medicare bundled payments for joint replacement cut costs by 20%


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