Bad debt incurred at Michigan hospitals and the financial assistance offered to help patients with medical bills declined by nearly $325 million in the first full year that the state expanded Medicaid eligibility under the federal Affordable Care Act.
At the same time, hospitals saw their margins increase, as more people had health coverage and losses from uncovered patients declined, according to data in the Michigan Health & Hospital Association’s 2017 Community Benefits report.
Using data from 2015, the report indicates that bad debt incurred when patients cannot or do not pay their bill declined from $561.8 million in 2014 to $425 million in 2015.
The financial assistance hospitals provided to patients declined as well, from $353.1 million in 2014 to $165.4 million in 2015, according to the MHA.
The association credited the reductions to the nearly 1 million people in Michigan who gained coverage under the ACA and creation of the Healthy Michigan plan with expanded Medicaid eligibility. Subsidized health services provided by hospitals also declined to $64.8 million from $90.2 million.
The reduction in bad debt and financial assistance were the largest at teaching hospitals and those located in urban areas that tend to have higher concentrations of Medicaid patients, said Laura Wotruba, director of public affairs for the MHA.
Some hospitals in the state have recorded a 50-percent decline in the number of people without health coverage who are seeking care, Michigan Health & Hospital Association CEO Brian Peters said.
“It’s been a real positive. There’s just no question about it,” Peters said of the coverage expansion under the ACA and Medicaid.
However, that impact could end under legislation in Congress to repeal and replace the Affordable Care Act. Both a House version of the proposed American Health Care Act and a Senate version would end the Medicaid expansion over a period of years.
The bill in its current form could come up for a Senate vote next week and “could really jeopardize what we view as some positive gains for Michigan citizens; folks who didn’t have coverage at all before,” Peters said.
“Over the longer term, you’re going to see real gains in the health status of people and a bending of the cost curve. But if you pull the rug out from under people, whether that’s in a year, two years or five years, you really jeopardize all of those gains,” he said.
The Healthy Michigan Plan created under the ACA presently enrolls about 650,000 people.
The $425 million in bad debt that Michigan hospitals incurred in 2015 stems in part from a steady migration that has been occurring for more than a decade by employers to lower-cost high-deductible health plans, Peters said. That transition has created a problem for hospitals, which have seen a growing number of patients who cannot afford to pay their deductibles, he said.
The decline from 2014 to 2015 in bad debt does contribute to less shifting of the costs of uncompensated care onto people with coverage. That eases one of the many drivers of escalating health premiums paid by employers and employees, although the other factors — such as expensive prescription drugs, an aging population and rising incidence rates of chronic illnesses — serve as “somewhat of a counterbalance” to the decline in uncompensated care, Peters said.
“The problem is that there are so many other pressure points on the system that are contributing to costs,” he said.
Hospitals also lost less on Medicaid in the first full year of expansion, even as they served more patients covered under the program. The annual shortfall in Medicaid payments, based on the cost of care, declined from $843.4 million to $776.9 million in 2015.
As bad debt, financial assistance and the Medicaid shortfall declined, Michigan hospitals in 2015 posted higher margins.
The aggregate patient margin for the 700 hospitals increased to 0.8 percent in 2015 from a negative 1.4 percent in 2014 for just patient care alone. That’s the first time in a decade that hospitals in the state collectively reported a positive patient margin, Wotruba said.
Operating margins that include all revenue sources other than investments increased to 5.1 percent in 2015, versus 3.5 percent in 2014.