Health Reform WK-EDGE Uncompensated care costs for uninsured may be rising after initial declines
Thursday, May 13, 2021

Uncompensated care costs for uninsured may be rising after initial declines

By Elena Eyber, J.D.

The Affordable Care Act brought a significant decline in provider uncompensated care costs for the uninsured. However, these costs continue to be considerable and may be on the rise due to the widespread job losses and the heightened need for health care during the COVID-19 pandemic.

The increase in the uninsured rate in recent years, as well as loss of health insurance coverage during the pandemic, has led to attention on the consequences of being uninsured. The need for medical care to test, treat, or prevent COVID-19 has also highlighted the potential consequences of uncompensated care for the uninsured. Two Urban Institute reports examine how uncompensated care costs for the uninsured changed following implementation of the Affordable Care Act’s (ACA’s) coverage provisions in 2014 and the changes in sources of payment for uncompensated care costs, plus provide estimates of the level of public funding that was paid to help offset providers’ uncompensated care costs for the uninsured in 2017.

Uncompensated care costs following the ACA. Reflecting a significant decline in the share and number of people who were uninsured at any point in the year, the average annual share of nonelderly individuals who had any uncompensated care costs fell by more than a third following ACA implementation, going from 7.3 percent in 2011-2013 down to 4.8 percent in 2015-2017. This change represents a decline in the number of people with uncompensated care costs from 20.2 million to 13.1 million. Correspondingly, the aggregate annual cost of uncompensated care provided to uninsured individuals dropped by a third following implementation of the ACA’s coverage provisions, from $62.8 billion per year in 2011-2013 to $42.4 billion in 2015-2017. The cost of implicitly subsidized uncompensated care dropped from $21.6 billion to $15.1 billion per year before and after the ACA, respectively. Despite declines in total amounts, the distribution of total aggregate spending for the uninsured was similar across the two periods, with the majority (approximately 70%) uncompensated and about 20% paid out of pocket by uninsured people both before and after the ACA. Uncompensated care costs declined across most provider and service types, and the distribution of costs of uncompensated care by service type was similar both before and after the ACA, with hospitals continuing to be the site of care for approximately 60% of uncompensated care.

Public funding. Nationally, at least $33.6 billion in public funds were paid to providers to help defray providers’ uncompensated care costs associated with caring for the uninsured in 2017. The federal government accounted for an estimated $21.7 billion, or nearly two-thirds of the public funding sources examined, most of which was through the Veterans Health Administration or Medicaid; providing $11.9 billion, states and localities made up the balance, primarily through indigent care and public assistance programs. Comparing the level of public funding to the estimate of total uncompensated care costs for the uninsured ($42.4 billion per year in 2015-2017), in the aggregate nearly 80.0 percent of providers’ uncompensated care costs were offset by government payments designed to cover these costs.

Concerns. While these reports showed significant declines in uncompensated care across providers following the ACA coverage expansions, the United States still faces sizable uncompensated care costs. Most of the providers’ costs in caring for the uninsured is compensated through complex funding streams that are financed largely with public funding. However, these approaches may be inefficient, may not target funds to providers with the most uncompensated care, or may still leave uninsured people with bad debt, credit issues, or even bankruptcy. Even before the COVID-19 pandemic, the uninsured rate in the United States had increased in recent years. Between 2017 and 2019, the number of the uninsured grew by 1.5 million. Further, the widespread job losses resulting from the pandemic in 2020 could exacerbate the losses of health insurance coverage and reverse the significant coverage gains seen since the full implementation of the ACA in 2014. At the same time, recent efforts, including reopening of ACA enrollment by the Biden Administration and enhanced premium subsidies and new incentives for states to expand Medicaid under the American Rescue Plan Act, could increase the number of people covered.

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