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According to the latest American Hospital Association's fact sheet, combined Medicare and Medicaid underpayments were $100.4 billion in 2020. (However, this is a long term problem. These underpayments have been going on for a number of years, even before Covid.)
For Medicare, hospitals received payment of only 84 cents for every dollar spent by hospitals caring for Medicare patients in 2020.
For Medicaid, hospitals received payment of only 88 cents for every dollar spent by hospitals caring for Medicaid patients in 2020.
In 2020, 67 percent of hospitals received Medicare payments less than cost, while 62 percent of hospitals received Medicaid payments less than cost.
Medicare is the federal health insurance program for the elderly. Medicaid provides health coverage for millions of low income Americans. The elderly and the poor in this country are not getting the funding for the health care they need.
In 2019, Medicare and Medicaid underpaid U.S. hospitals by about $75 billion in 2019. So things have gotten worse.
HOSPITALS ARE FACING BILLIONS IN LOSSES
A report released in the fall of 2022 stated that hospitals were facing billions in losses. These losses are significant compared to pre-pandemic levels. The report also stated that hospitals are facing a host of other related challenges, including workforce shortages, supply disruptions, and rising expenses. Pessimistic projections for 2022 showed a 133% decline in operating margins compared to 2019 levels. Expenses were projected to be $135 billion over the previous year.
Financial analysts have said that 2022 may have been the worst year for hospital finances in decades. Yet 2023 looks like it will be another year of financial underperformance, with rural providers in especially dire circumstances.
Tell Medicare/Medicaid: Hospitals should protect us from Hospital-Acquired COVID (CDC, 5-22-23)
2022 Was Hospitals’ Worst Financial Year in Decades, But 2023 Won’t Be Much Better (MedCity, 1-2-23)
Hospitals face billions in losses this year (Health Exec, 9-16-22)
DOCTORS ARE ALSO BEING UNDERPAID
A result of hospitals being underpaid is that doctors and other health staff are being underpaid as well.
Current Medicare payment system on an unsustainable path | American Medical Association (American Medical Association, 2021)
The AMA is deeply alarmed about the growing financial instability of the Medicare physician payment system due to a confluence of fiscal uncertainties physician practices face related to the pandemic, statutory payment cuts, lack of inflationary updates and significant administrative burdens.
The evidence is clear: The Medicare payment system is on an unsustainable path threatening patient access to physicians.
Are primary care physicians underpaid? New study suggests the answer is yes (Medical Economics, 7-1-19)
A new study from Merritt Hawkins compares the average salaries of 19 medical specialties compared to the average annual inpatient/outpatient revenue they generate for their affiliated hospitals.
Essential but undervalued: Millions of health care workers aren’t getting the pay or respect they deserve in the COVID-19 pandemic (Brookings, 5-28-20)
Overworked, underpaid: Local doctor says COVID burnout straining healthcare workers (WRAL, 4-21-22)
DISPARITY IN MEDICAID, MEDICARE AND COMMERCIAL INSURANCE PAYMENTS
There is a persistent and growing disparity in the rates paid to health providers by Medicare, Medicaid and commercial insurance.
Medicaid rates have been found to be far below Medicare rates, which are well below commercial rates. Fee for service inpatient hospital base payments in Medicaid were 22 percent below comparable Medicare rates. To narrow or close this gap, many states make supplemental payments to some or all hospitals in their state. However, not all states make supplemental payments, and even in states that make them, not all hospitals receive them. These low Medicaid base payment levels put providers who serve low-income communities at risk. It will be much harder for them to keep afloat, attract employees, and provide quality care. This is also a direct threat to the lives of the people who are supposed to be receiving this care.
The Congressional Budget Office also found that commercial physician reimbursement rates were 30 percent higher than Medicare reimbursement rates. For inpatient care, the Kaiser Family Foundation reported commercial rates are nearly 90 percent higher than Medicare.
KEY ORGANIZATIONS
Coalition to Protect America's Health Care
RELATED LINKS
New Study Finds that Private Plans Pay Hospitals More Than Medicare for Inpatient and Outpatient Services (Medicare Rights, 5-19-22) The Study
Large Cuts to Medicare Are Coming in 2023 Unless Congress Acts
Millions May Lose Medicaid When Public Health Emergency Ends