Uncompensated Healthcare Costs in the United States in 2021 Refresh

Let’s face it: healthcare policies, programs, and payment methods are complicated. And where complications exist, extra costs are usually also present. Extra costs mean bigger and more confusing bills, which uninsured patients may be unable to pay, especially if they’re low-income or don’t have alternative coverage options. This is bad news for healthcare organizations and patients everywhere. Despite increased government healthcare offerings through the Affordable Care Act (ACA), Medicaid, and the Marketplace, hospitals still lose lots of money each year due to uncompensated healthcare costs. This causes bad debt accrual, which in turn creates problems for their revenue stream. That poor revenue stream not only affects hospitals’ operations, but also the quality of care they can give patients. The entire process becomes a cycle in which treating healthcare needs becomes increasingly difficult and expensive. This cycle can be broken, but it takes a lot of hard work.

The Cost of Uncompensated Care

According to the American Hospital Association (AHA), uncompensated care is an overall measure of hospital care provided for which no payment was received from the patient or insurer. It is the sum of a hospital’s bad debt and the financial assistance it provides. Bad debt consists of services for which hospitals expected to receive payment but then didn’t. Financial assistance, on the other hand, consists of services that the hospital covered or absorbed because it neither received nor expected to receive payment from patients. In practice, however, hospitals often have difficulty in distinguishing bad debt from financial assistance.

These problems tend to only be exacerbated by the constantly changing nature of the American healthcare system and the overall high cost of private insurance coverage. Dealing with healthcare changes can be challenging for both health care providers and hospital budgets. Federal and state governments continue to roll out new regulations and policies or change old ones, especially as the ACA continues to evolve. These changes occur regularly, too, often after important elections when newly-seated lawmakers and administrations begin to make new decisions or overturn existing decisions about healthcare regulation.

These decisions can cause a lot of undue stress for hospitals. Many hospitals struggle in the first place to get their patients to pay for their care, especially long-term, no matter what kind of coverage they have (or lack thereof). As a matter of fact, because of these struggles, hospitals of all types have provided more than $702 billion in uncompensated care to their patients since 2000 (an average of $42.4 billion per year in the 2015-2017 time period). One of the main ways that healthcare organizations attempt to recover those costs is by finding innovative ways to care for their patients, though this is also challenging when budgets aren’t where they need to be.

However, when patients have access to healthcare, whether it be through the ACA, Medicare, Medicaid, charity care, or any other insurance plan, many hospitals’ uncompensated care costs drop significantly. These sources of payment can certainly help both hospitals and patients alike. Of course, not all uncompensated care costs come from patients’ ability or inability to pay. Some come from financial assistance offered by the hospitals themselves, and some come from insurance payers denying claims and payouts or setting. But in the long run, what matters is simply that hospitals need better ways to recover the funds that they are owed for the care they’ve provided.

Positive and Negative Effects of Healthcare Changes

Due to continued Medicaid expansion and changing ACA regulations, between 2015 and 2017, the nonelderly patient uninsured rate fell to 19.6 percent of the American population, which is down from the 25.5 percent of 2011-2013. This was good news for hospitals, because it meant they could recoup some of the costs that may otherwise have been lost. Since then, many states, such as Oregon, California, Vermont, Minnesota, Illinois, and West Virginia, have expanded their Medicare and Medicaid offerings. Also, some hospitals have been able to receive Medicaid DSH payments from the federal government that can cover some uncompensated costs. However, statistics like these are not guaranteed to stay stable, and the impact of the COVID-19 pandemic on the amount of uncompensated care costs that hospitals have to deal with has yet to be fully evaluated (though it is likely that it has caused progress to stall, if not fall back a couple steps).

While many states do allow Medicaid programs, some have put waivers and restrictions in place to further regulate them, which can increase these states’ uninsured population. Hospitals tend to still suffer from budget shortfalls as a result because expenses pile up with little hope of reimbursement. Medicaid, the ACA, and other government programs may help in these situations in spite of restrictions. But even with these systems in place, inefficient revenue streams and the lack of communication among patients, hospitals, and government entities often mean that funds are unequally distributed to different hospitals. Smaller and more rural hospitals often suffer the consequences of such revenue stream backups, causing their patients to not receive the kind of high quality healthcare that they should.

With the changes in government healthcare and decision-making continuing to progress, the future is not entirely for any of these statistics, though lawmakers are increasingly pushing for universal affordable healthcare options. This makes it all the more important for hospitals to have a way to help uninsured individuals figure out how to pay for their healthcare. Communication between patients and doctors must improve. Bills and insurance options need to be more transparent and understandable. Accounts Receivable departments need to have more support as they work to submit claims. Patients need to have help setting up payment plans, if needed. Hospital services need to be managed more effectively, and expedited where possible. Creating a better experience in these ways will help guide patients in such a way that they can and are more likely to pay their bills.

Why Patients Pay or Don’t Pay for Health Care

Just as healthcare plans and policies are complicated, healthcare costs are, too. For the patient who is inexperienced with handling them, seeing a hospital bill can be confusing and overwhelming. Unfortunately, they also often don’t have many options to discuss hospital costs, what they mean, and how to go about making plans to pay them with someone who has experience. This results in a disconnect between patients and hospitals, which can lead one way or another to unpaid hospital bills.

On the other hand, patients who have access to healthcare coverage are much more likely to pay their healthcare costs or request coverage from insurers. This is positive news for hospitals, because a patient who has an effective means to pay for healthcare is more likely to pay what they owe in full. They’re also more likely to be satisfied with their experience, and they’ll come back if they need to.

Another factor that affects patients’ ability to pay is rising healthcare costs. Given how quickly these costs are increasing, health insurance is more important than ever for customers to have and understand. But in spite of all options, and based on individual circumstances, many don’t. And oftentimes, there’s no one available to explain a patient’s options to them. If hospitals can find a way to improve patient experiences through advocacy and assistance with understanding the billing process, they may eventually find that their total uncompensated care costs gradually decrease.