New data compiled by the American Hospital Association (AHA) shows how hospitals remain underpaid from publicly-funded payers Medicare and Medicaid for their services. In 2019, the combined payment shortfall for Medicare and Medicaid stood at $75.8 billion. To put it into perspective, Medicare paid hospitals 13 cents less per dollar spent on the treatment of its members, while Medicaid paid 10 cents less per dollar. That said, the shortfall was marginally lower than the one recorded in the previous survey.
- As part of its Annual Survey of Hospitals, AHA collects data on hospital payments and costs incurred on the personal care for Medicare and Medicaid members.
- The payment shortfall for Medicare stood at $56.8 billion in 2019 and that of Medicaid was $19 billion. In 2017, the aggregate shortfall was $76.8 billion. Individually, Medicare underpaid hospitals $53.9 billion and Medicaid shortfall stood at $22.9 billion.
- The aggregate shortfall in 2016 was $68.8 billion and $57.8 billion in 2015.
- According to AHA, 63% of hospitals were paid less than the care costs by Medicare in 2019 while 58% of hospitals received Medicaid payments less than costs.
- Entertaining Medicare and Medicaid is voluntary for hospitals, except for the non-profit ones that enjoy federal tax exemption.
- To overcome the payment shortfall, according to reports, many hospitals prefer treating privately insured patients and charge them more compared to other patients. This practice is known as cost-shifting.
- According to a paper published by the National Bureau of Economic Research, cost-shifting had hiked private payer rates by 1.6%, as a result of which payments to each hospital jumped by $86,500. The Colorado Department of Health Care Policy & Financing held cost-shifting responsible for making the state one of the most expensive for healthcare.