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January 11, 2017

Uncompensated care costs could rise by $1.1T over decade under ACA repeal, analysis finds

Daily Briefing

Uncompensated care could grow by $1.1 trillion between 2019 and 2028 if Republican lawmakers repeal major parts of the Affordable Care Act (ACA) without replacing the law, according to a new analysis from the Urban Institute.

Analysis details

The analysis, which was funded by the Robert Wood Johnson Foundation, builds off research Urban Institute released last month.

Not so fast: 5 GOP senators seek to delay start of ACA repeal

For the analysis, the researchers assumed Congress would use a budget reconciliation bill similar to one Congress passed last year to repeal major ACA provisions. The bill (HR 3762) would have eliminated the ACA's coverage mandates, subsidies, and Medicaid expansion, while keeping in place other parts of the law, such as essential health benefit requirements and protections for individuals with preexisting conditions. President Obama vetoed HR 3762.

Last week, the Senate voted 51-48 to begin debate on a budget resolution introduced earlier in the week that initiates Republicans' efforts to repeal the ACA through the budget reconciliation process. The resolution does not contain any specifics on how it would repeal the ACA but instructs two House and two Senate committees to draft and approve legislation that includes provisions to repeal parts of the ACA. The resolution gives the committees until Jan. 27 to do so.

Analysis findings

In the new analysis, researchers assessed how coverage losses spurred by the proposed ACA repeal would affect health care spending and uncompensated care.

The researchers estimated that the increase in uninsured individuals would result in an additional $88 billion in uncompensated care in 2019 and an additional $1.1 trillion in uncompensated care between 2019 and 2028. Over that ten year period, the researchers said that uncompensated care would increase from $656 billion to $1.7 trillion.  

Providers would bear much of the burden of caring for newly uninsured individuals and covering uncompensated care costs, Politico reports.

Of the $1.1 trillion in additional uncompensated care between 2019 and 2028, the researchers estimated:

  • $147 billion would come from physician practices;
  • $217.6 billion would come from prescription drugs;
  • $296.1 billion would come from hospitals; and
  • $406.1 billion would come from other services.

The report stated, "Partial ACA repeal could lead to a fourfold increase in the amount of uncompensated care providers finance themselves compared to current levels. As a result there would likely be a substantial increase in unmet health care need for the uninsured."

Further, the researchers said while Medicare Disproportionate Share Hospital (DSH) payments would increase as the number of uninsured residents grows, the projected payment bump would not offset the increase in uncompensated care. If 29.8 million residents became uninsured, DSH payments would increase by $35 billion between 2019 and 2028. According to the researchers, the increase in DSH payments would cover less than 4 percent of the increase in uncompensated care.

Matthew Buettgens, senior research associate in the Urban Institute's Health Policy Center, in a statement said, "The increase in uncompensated care sought by the newly uninsured would be more than state and local governments and health care providers could internalize, undoubtedly leading to substantially more unmet medical need."

In addition, the researchers projected the coverage losses would result in lower revenues "for providers of all types," noting that "uninsured people use less medical care than they would if they had health insurance."

For instance, the researchers estimated that payer and consumer spending on health care services for the nonelderly population would fall by $145.8 billion in 2019. The researchers estimated that in 2019:

  • Hospital spending would fall by $59 billion;
  • Physician practice spending would fall by about $20 billion; and
  • Prescription drug spending would fall by $32 billion.

Between 2019 and 2028, the researchers estimated that health care spending would decline by $1.7 trillion, including a:

  • $596.4 billion decline in spending on hospital services;
  • $428.6 billion decline in prescription drug spending; and
  • $217.7 billion decline in spending on physician practice services.

Hospital leaders' concerns about ACA repeal

Providers say steep increases in uncompensated care costs could jeopardize hospital finances, particularly those serving low-income populations, Politico reports.

According to Politico, hospitals estimate that repealing the ACA could cost them $165 billion in about five years and trigger "an unprecedented public health crisis" if sicker populations lose coverage and are unable to get care. The uncertainty surrounding the ACA repeal and how that will affect the health care industry is prompting many providers to rein in spending, Politico reports. 

Heidi Gartland, VP for community affairs and government relations at Cleveland-based University Hospitals Health System, said, "Health systems only have a few tools to balance our budgets, and those are things like curtailing services and reducing our workforce." She added, "It really is going to have a big impact on access to care, whether you're insured or uninsured."

Illinois' hospital association projected the state could lose an estimated 95,000 jobs and face $13.1 billion in economic losses if the ACA is repealed without a replacement.

Report: 52 million US adults have pre-existing conditions, could be affected by ACA repeal

Insurer concerns about ACA repeal

Health insurers also raised concerns about the possible effect of repealing the ACA.

According to Politico, insurers are particularly concerned about the potential for losing subsidies to help consumers purchase health plans and the individual mandate.

Ceci Connolly, CEO of the Alliance of Community Health Plans, said, "What would really throw a wrench in that is if the subsidies disappeared quickly," adding, "Then the economics of this start to fall apart pretty fast."

Ken Janda—CEO of Community Health Choice, a Houston-based not-for-profit health plan—said insurers believe that repealing the individual mandate while leaving in place provisions that bar insurers from discriminating against people with pre-existing conditions could cause premiums to soar (MacDonald, FierceHealthcare, 1/5; Rappleye, Becker's Hospital CFO, 1/5; Muchmore, Modern Healthcare, 1/5; Demko/Cancryn, Politico, 1/9; Robert Wood Johnson Foundation release, January 2017; Buettgens et al., Urban Institute report, January 2017).

The 12 keys to hospital and health system success in 2017

The 12 keys to hospital and health system success in 2017

No matter what happens to the Affordable Care Act, to succeed in the next era of health reform, you'll need more consumer-focused service, more accessible care, and more risk. So how can you accomplish all of these goals without sacrificing your bottom line?

Learn the 12 keys that hospital and health systems leaders need to know to provide more consumer-friendly care while meeting your population health and risk-based payment goals.


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