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Question: Financial Impact of Health Care Reform Proposals

Last post 11-24-2009, 10:05 PM by SFoster. 1 replies.
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  •  11-20-2009, 5:05 PM 9433

    Question: Financial Impact of Health Care Reform Proposals

    I am interested in initiating a conversation related to the financial impacts of the current health care reform proposals, that of both the House and of the Senate.  Specifically, is anyone aware of what will happen to DSH (Disproportionate Share Hospital) payments under each version of the health care reform bill?  Do you know what section/pages of each bill discusses these payments?  Based on what information is shared amongst this group in response to the question above, what do members of this group foresee the impacts will be for both adult and pediatric acute care hospitals if the bill is successful in reducing the number of uninsured Americans over time?  Do you predict that it will still result in an overall decrease in reimbursement to hospitals on an annual basis or will the reimbursement numbers be sustained due to a decrease in the uninsured population (increase in insurance payments)?  I look forward to the discussion and insight.
  •  11-24-2009, 10:05 PM 9435 in reply to 9433

    Re: Question: Financial Impact of Health Care Reform Proposals

    It’s a complicated question with an even more complicated answer. Quite frankly, no one knows what the final bill will resemble. I believe the discussion should start with a brief summary of events:

    Most recently, the Senate finished merging the Finance Committee and the Health, Education, Labor and Pensions (HELP) Committee bills and unveiled their long-awaited healthcare reform package.  In general, the “Patient Protection and Affordable Care Act,” is an $848 billion dollar healthcare package which would expand health coverage to 94% of Americans under age 65.  Here’s a brief summary of HR 3590.  You can find the full DSH details in Part III: improving Payment Accuracy, Section 3133, page 511:

    ·         The creation of a government regulated insurance exchange in 2014 where private insurers would compete with a government run public option. States would be permitted to opt out of the public option by passing a law to refuse it.  Illegal immigrants would be barred from purchasing insurance from the exchange.

    ·         Medicaid would be significantly expanded to cover individuals making 133% Federal Poverty Level (FPL) or below.  Individuals between 133% and 300% FPL would be eligible to receive subsidies and individuals between 133% and 400% FPL would also receive annual caps on premiums and out-of-pocket expenses as a percentage of income.

    ·         Increased regulations on the ability of insurance companies to deny coverage or care, cancel policies for the sick or vary premiums on age, health status, gender and other factors.

    ·         All individuals would be required to have health coverage through private insurers, a government run plan or the newly created exchange or face penalties. Employers will be required to offer insurance to employees or face penalties.

    ·         The healthcare reform measure would be paid for in part by $400 billion in cuts on payments to medical providers for Medicare spending.  Additionally, the bill calls for $371.9 billion in new taxes over 10 years, primarily from a 40% excise tax on the value of health insurance plans above $8,500 for individuals and $23,000 for families.  Also, the Medicare payroll tax for high-income earners (more than $200,000 for individuals or $250,000 for families) would be increased by 0.5% to 1.95% of adjusted gross income. 

    ·         Medicare Disproportionate Share Hospital (DSH) payments will be reduced by 75% over 10 years (totaling $20 billion) starting in 2015.  In addition, the legislation cuts Medicaid DSH by 50% over 10 years, only if the number of uninsured decreases by 50%.


    The House and Senate bills have notable differences when it comes to how each committee has proposed to fund their initiative. First, the House version plans to squeeze $404 billion out of projected growth of Medicare and other federal programs over the course of ten years, including $117 billion from cuts in Medicare Advantage Plans. On the other hand, the senate version is more aggressive proposing a $436 billion cut out of projected growth in Medicare and other federal programs over the course of ten years including a $118 billion in cuts to federal subsidies for privately offered Medicare Advantage plans.

    Related to your question on potential impacts, I can answer on based on my experience in acute care hospitals and the conversations I have held with other colleagues.  First, we hope either plan builds on the employer based model of healthcare by reforming insurance including requiring guarantee issue and eliminating pre-existing condition exclusions. Either plan should allow hospitals to automatically enroll any uninsured who present to our hospitals in the appropriate insurance program. However, hospitals should oppose any reduction in DSH funding or market basket without associated increases in coverage of the uninsured. Most importantly, we hope either plan enacts the ban on physician self referral.

    The reality is that a majority of hospitals in the nation share a significant portion of their business to Medicare patients and it doesn’t take long to realize the current system could be much better. Increasing Medicare coverage to millions of uninsured will no doubt produce additional revenue for hospitals, but at what cost? 

    As young healthcare executives, this is no doubt an exciting time in our careers of which the changes will affect our profession significantly. We hope it's the right change.



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