Friday, June 13, 2014
A couple weeks ago, the New York Times reported that some hospitals around the country are starting to curb their charity care and financial assistance to uninsured patients who they believe should purchase coverage on the ACA exchanges. This is a troubling trend that threatens to weaken the fragile health care safety net for low- and moderate-income individuals.
The hospitals in the article have taken a range of actions including charging charity care patients a copay or coinsurance for their care or reducing the income threshold for eligibility for financial assistance. The hospitals justify their actions, saying that because the ACA marketplaces and subsidies now make insurance widely available, individuals ought to purchase their own coverage.
There are several problems with this trend. First, cost-sharing doesn’t work for the poor and the chronically ill. Rather than causing these patients to consume the appropriate amount of care or to purchase insurance coverage, even small amounts of cost-sharing may make these individuals avoid needed and cost-saving care. Second, cutting back on charity care is particularly harmful for individuals in states that are not expanding Medicaid, because individuals under 100% of poverty in those states are ineligible for ACA premium subsidies as well as Medicaid. Third, hospitals may be trying use stingy financial assistance policies to push self-pay or uncompensated care patients to the safety net or religious hospitals in the community that already provide a disproportionate share of the uncompensated care, even while disproportionate share payments under Medicare and Medicaid are shrinking.
The Times article underscores a larger problem that the ACA does not close all of the health care coverage and affordability gaps in this country, but many in the industry are acting as if the gaps are gone and cutting back help for those whom they presume are choosing to remain uninsured. As suggested by Professor Sidney Watson in the article, many individuals remain uninsured because insurance is unaffordable. Moreover, affordability is still a problem for those with insurance because increasingly health plans require significant cost-sharing due to higher deductibles and co-insurance. In addition, patients may face higher out-of-pocket costs for out-of-network care, a scenario made more likely by the proliferation of narrow networks. Many of these individuals will struggle to pay their hospital bills even with insurance and thus will suffer if hospitals cut back their financial assistance policies.
Some may ask, didn’t we solve this problem with ACA’s 501(r) rules for tax-exempt hospitals? Among other things, the 501(r) rules require tax-exempt hospitals to have and publicize their financial assistance policies, limit the amounts charged to patients eligible for financial assistance to the amounts generally billed to insured patients, and to make reasonable efforts to determine a patient’s eligibility for financial assistance before using extraordinary debt collection practices. The 501(r) rules, however, have a lot of limitations: (1) they do not apply to the growing share of for-profit hospitals; (2) they do not provide any requirements for the income limits for financial assistance but rather give hospitals complete discretion to determine eligibility; (3) they do not require hospitals to offer or provide free charity care; (4) they do not stop the hospital from using aggressive debt collection practices once a determination of eligibility for financial assistance is made. Thus, the 501(r) rules do little to prevent even tax-exempt hospitals from cutting back on charity care, making financial assistance less accessible, or increasing the amount of cost-sharing borne by patients who can ill-afford it. The ACA starts to narrow gaps in health insurance affordability and access, but it does not get us all the way there so it is not the time for hospitals to shrink their financial assistance and charity care.