Health systems brace for more Medicare, uncompensated care

Health systems across the U.S. are preparing for shifts in Medicare and Medicaid programs, affecting their patient populations.

The Medicare-eligible population continues to grow as Baby Boomers age into the program. Medicare is expected to see continued growth through 2030, when all Baby Boomers will be eligible. Medicare reimbursement rates are challenging health systems, growing at a slower pace than inflation and hospital expenses.

There is also a shift in the types of plans beneficiaries are selecting. In 2024, around 33 million Medicare beneficiaries chose Medicare Advantage plans because they offered benefits including dental, vision and hearing without additional costs, according to the Kaiser Family Foundation. However, many health systems have had trouble negotiating Medicare Advantage contracts and seen increased prior authorizations and denials with the program, leading some hospitals to drop in-network benefits.

"No one, or very few people, in healthcare would say that the process of receiving authorizations or payment is getting easier," said Tabitha Hapeman, DNP, APRN, RN, enterprise director of utilization management and clinical appeals at WVU Medicine. "Healthcare providers and payers continue to be diametrically opposed, and bureaucratic burdens continue to increase. A primary cause for concern is the continued proliferation of Medicare Advantage products. The administrative burden and increasing costs necessary to get paid requires providers to be strategic and innovative. Challenging the status quo, leveraging automation, and fiercely fighting for appropriate payment will become even more pressing goals in 2025."

"Medicare Advantage remains a significant headwind as plan sponsors consistently reimburse at rates lower than traditional fee for service Medicare," Stephen Rinaldi, senior vice president and chief revenue officer of UNC Health Care System in Chapel Hill, told Becker's. "In the coming year, we will continue to work with our payer partners to ensure we have agreements that properly consider future inflation and performance targets. We must also do our part to embrace innovation, technology, and the many tools at our disposal to be as efficient as possible while delivering the quality care our patients expect and deserve."

Hospitals are scrambling to maintain that quality of care as margins tighten and potential changes to government payers loom.

"A big concern is how will we continue to provide high quality services and resources and low cost care to all of our stakeholders if there are major changes in our Medicare / Medicaid compensation/reimbursements, ACA and CHIP programs," said Margaret Larkins-Pettigrew, MD, senior vice president and chief clinical diversity, equity and inclusion officer at Highmark Health Allegheny Health Network in Pittsburgh. "We need to prepare for the upcoming economic changes that are sure to have a significant impact on how we’re able to best serve our communities."

Medicaid is also shifting. Medicaid enrollment increased for several years before dropping 7.5% in 2024. Enrollment is expected to further decline 4.4% in 2025 as policies change and continuous enrollment during the pandemic ceases. Some who lost coverage haven't re-enrolled, according to the Kaiser Family Foundation.

"In Western Massachusetts, Medicare and Medicaid will be a large and growing share of our community and patient base," said Peter Banko, president and CEO of Baystate Health in Springfield, Mass. "These populations are already more than 70% of our revenue, with increasing value-based arrangements and the imperative to leverage very diverse care teams (physicians, nurses, navigators, and family members enabled by complex technology solutions). Care model transformation requires Baystate Health to impact four mutually reinforcing, integrated components — care offering, design target, delivery resources, and care design."

Hospitals are also seeing higher uncompensated care as individuals lose Medicaid coverage or decide not to purchase health insurance. If there are changes to the health insurance exchanges, more people could end up uninsured. Hospitals across the country, and particularly safety-net hospitals, are preparing for the worst.

"As the largest private safety net health system in Illinois, we perennially face financial headwinds," Ngozi Ezike, MD, president and CEO of Sinai Chicago. "We are heavily dependent upon government payers with nearly two-thirds of our patients utilizing Medicaid. And we don't turn anyone away and end up providing more than $50 million each year in uncompensated care for those without healthcare coverage. In the end, the math simply doesn't work to make us whole and we end up losing money every year."

For the next year, Dr. Ezike and her team are focused on finding ways to fill the gaps to financial stability while continuing to provide charity care.

"It's not going to be easy, especially with city and state budget challenges looming and a good deal of uncertainty about healthcare policy pivots with a new administration," said Dr. Ezike. "So, we need to look creatively at new philanthropy channels, partnerships with better resourced systems along with ongoing efforts to be as efficient and cost-effective as possible. These are difficult needles to thread, but our leaders and caregivers are committed to our mission that healthcare is a right for all."

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