Hospitals & Charity Care: The Medicaid Solution That Wasn’t

by Andrew Collins: Nonprofit hospitals have made much ado about the costs of charity care provided to the poor. So when President Obama’s 2010 health law went into effect, offering states an opportunity to expand Medicaid and bring in billions of dollars in federal welfare spending, these hospitals jumped at the opportunity. They argued that adding working-age people without children or disabilities to the Medicaid rolls could curb their charity care and bad debt expenses and put them on better financial footing.

Is there reason to doubt these hospitals’ claims that Medicaid expansion is in the best interest of health care costs? Watchdog reporter Jason Hart has spent the past year and a half covering the true costs of Medicaid expansion in the states under Obamacare, and his reports on the issue show that these hospitals’ concerns are overblown. Here’s what his investigations have uncovered:

Ohio
In 2013, the year when Ohio was considering expanding Medicaid, nonprofit hospitals profited to the tune of $2.8 billion. Some of the larger institutions posted nonprofit profits of hundreds of millions of dollars. Charity care costs represented just 2.4 percent of their expenses – meaning that most nonprofit hospitals would have ended up in the black with millions of dollars to spare even if they had no funding for their charity care. Despite the manageable costs, however, they still lobbied for Medicaid expansion.

Review the full details about each Ohio nonprofit hospital’s charity costs.

Kentucky
A Watchdog review of Kentucky’s nonprofit hospitals, which provide health care whether or not a patient has the ability to pay, found that just as in Ohio, charity care costs represent a very small portion of total expenses. The 2012-13 financials of of 37 nonprofit members of the Kentucky Hospital Association show that just 3.3 percent of their costs go to charity care. That figure was even smaller than other areas of uncompensated care such as unreimbursed Medicaid and bad debt from when patients don’t pay their bills. Those costs amounted to 3.5 percent and 7.3 percent, respectively, of hospitals’ total expenses.

Kentucky has since expanded Medicaid through Obamacare, but it is having some unexpected results. “While charity care has declined due to people gaining Medicaid coverage, uncompensated are is far more than just charity care,” wrote the KHA in a report last April. That report found that expanding Medicaid has actually increased nonprofit hospitals’ costs for unreimbursed Medicaid, because the program underpays for services.

Review the full details about each KHA nonprofit hospital’s charity costs.

Indiana
Rhetoric over Medicaid expansion has clashed with reality in the Hoosier state, especially when it comes to nonprofit hospitals’ fuss about charity care expenses. A Watchdog analysis of 31 nonprofit members of the Indiana Hospital Association (similar to the analyses cited earlier in this piece) found that charity care costs amounted to just 3.2 percent for the year when IHA was advocating for Medicaid expansion through Obamacare. Just as in Kentucky, this was the smallest portion of uncompensated care costs for IHA members. Unreimbursed Medicaid averaged 4.9 percent of total revenue, and bad debt expenses averaged 5 percent.

Indiana’s Republican Gov. Mike Pence has embraced Obamacare’s expansion plan, but talking points from the Expand Indiana Coverage Campaign neglect to mention that unreimbursed Medicaid, which will surely grow with an expansion of the program, is actually a bigger part of the problem than charity care costs.

Review the full details about each IHA nonprofit hospital’s charity costs.

Wyoming
The fourth installment of Hart’s investigations into the costs of uncompensated care focuses on Wyoming, where hospitals (again!) want the state to expand Medicaid under Obamacare. A study last year by the Wyoming Legislative Service Office (LSO) found that charity care costs only amounted to a mere 7 percent of uncompensated care costs, versus a whopping 33 percent for bad debt and 14 percent for Medicaid underpayments. Expanding Medicaid would almost certainly push those percentages even higher as an estimated 17,600 more adults would join the program.

Review the full breakdown of Wyoming hospitals’ uncompensated care costs.

Virginia
Charity care and other uncompensated costs haven’t stopped nonprofit hospitals in the Old Dominion from staying in the black. Watchdog’s review of a 2012-23 financials report found that 88 percent of the 25 nonprofit members of Virginia Hospital & Healthcare Association turned in the nonprofit version of a profit, averaging $30 million more in revenue than expenses. Charity care costs at these hospitals averaged only 4.7 percent – less than the combined expenses of unreimbursed Medicaid (2.7 percent) and bad debt (4.1 percent). Like the other states menionted here, the hospitals want Virginia to opt in to Medicaid expansion through Obamacare.

Without the expansion, however, it appears they are doing just fine. As Mike Thompson, president of Virginia’s free-market Thomas Jefferson Institute for Public Policy, told Watchdog.org, “These guys cry wolf just a little too often. Overall the hospital industry is making good profit.”

Review the full breakdown of VHHA nonprofit hospitals’ uncompensated care costs.

Michigan
Michigan has come under national scrutiny for a number of big problems, but charity care costs are not one of them. According to a Watchdog survey of 66 nonprofit members of the Michigan Health & Hospital Association, charity costs averaged just 1.4 percent of nonprofit total expenses. Unreimbursed Medicaid and and bad debt costs were both much higher, at 3.4 and 5.5 percent respectively. Altogether, these hospitals averaged $7.8 million more in revenue than in expenses.

Review the full breakdown of MHA nonprofit hospitals’ uncompensated care costs.
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Andrew Collins (@ACwords) when not writing an article, spearheads Franklin Center’s social media campaigns, promoting journalism through Franklin Center, Watchdog.org, and Watchdog Wire-branded accounts on various social media platforms. Previously, Andrew worked in campaign communications and television news.

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