Uncompensated Care and the Taxpayers

I wrote last week that I’m a little bit skeptical that providing uncompensated care to the indigent uninsured really raises health care prices for the rest of us. Austin Frakt who’s looked into this quite a bit notes that there are other channels through which the cost-shifting can manifest itself, including just directly through the tax system.

Indeed, Sarah Kliff argues persuasively that one aspect of this is going to hammer states that refuse to accept federal money for Medicaid expansion. That’s because right now Medicaid makes something called Disproportionate Share (DSH) payments to hospitals that face an unusually large burden of uncompensated care. But when congress was drafting the Affordable Care Act, they eliminated this program on the grounds that the overall bill should drastically reduce the quantity of uncompensated care out there. This means that a state that refuses to expand Medicaid is now going to find its hospitals cut off from a substantial source of funding. Kliff says that in Texas, we’re talking about almost a billion dollars a year in existing hospital funding that’s going to vanish. Texas hospitals could easily get that money back and more if the state legislature says yes to Medicaid expansion, but until they do the hospitals will be in the lurch.