Uncompensated Care Calamity

by Charles Katebi

If at first you don't succeed, try, try again. After the Wyoming legislature overwhelmingly rejected Medicaid expansion, its advocates returned to the drawing board to design another half-baked measure to help hospitals cope with the rising cost of uncompensated care. Senate File 145, otherwise known as the Uncompensated Care Bill, emerged as the alternative to Medicaid Expansion. And like Medicaid Expansion before it, the Uncompensated Care Bill is the latest quick fix that the legislature hopes will stop the bleeding, but fails to address the underlying symptoms.

Before getting into how uncompensated care affects Wyoming, it is important to understand what uncompensated care is. Uncompensated care comes in two forms, charity care and bad debt. Charity care is service provided by hospitals without any expectation of payment, usually in the form of visits to the Emergency Room. Bad debt is when services are provided and payment is invoiced, but the patients never end up fully reimbursing the hospital.

Uncompensated care burdens hospital of all types, but has been particularly hard on non-profit hospitals. Unlike for-profit hospitals, the IRS requires that non-profit hospitals provide charity care for little or no compensation from their patients. However, the IRS does not specify how much care a hospital is required to provide; this can make a non-profit hospital's tax status a political punching bag. In 2012, the Illinois Department of Revenue threatened to revoke the property-tax exemption from three non-profit hospitals for supposedly providing insufficient levels of charity care. As one might expect, cases like these make non-profit hospitals wary of turning away the uninsured from charity care.

However, charity care and bad debt are not solely responsible for the increasingly strained finances of hospitals. Medicaid notoriously pays hospitals for less than the cost of care they provide to its beneficiaries. When Medicaid's low reimbursements are counted alongside charity care and bad debt, uncompensated care accounts for 8 percent of the total cost of Wyoming's hospitals, but several hospitals, such as Carbon County Memorial and Niobrara Health and Life have spent upwards of 15 percent.

The problem of uncompensated care will likely be further exacerbated by new rules established under the Affordable Care Act. Tax-Exempt hospitals will soon be prohibited from engaging in what the IRS deems to be "Extraordinary Collections Actions" related to recouping debts owed by non-paying patients. Hospitals will be barred from taking legal action against individuals of limited means that do not repay their debts. And they will also be unable to sell this debt to interested parties.

What Wyoming's legislature ultimately passed on their last day in session will shift these mounting costs from hospitals to the taxpayer. SF 145 earmarks $3 million to pay for for-profit and non-profit hospitals' uncompensated care. $2 million will go to hospitals will less than 100 days of cash on hand. And the rest will be made available for hospitals with greater financial security.

Aside from assertions by supporters in the legislature, SF 145 will not stop uncompensated care from bleeding Wyoming's hospitals dry. Non-profit hospitals are still expected to provide large amounts of charity care, and the cost of medical care continues to rise every year. Without serious changes to how we as a society provide healthcare to the poor, legislators will be back next year looking to shift these costs onto taxpayers again.