Healthcare News & Insights

Loss of ACA subsidies could affect hospitals’ bottom line

Hospitals have had to weather many changes due to healthcare reform. Now, a case being argued before the Supreme Court may alter one of the key features of the Affordable Care Act (ACA): healthcare subsidies. And the changes could have a drastic effect on how hospitals do business.

Decorative Scales of Justice in the CourtroomIn King v. Burwell, opponents to Obamacare are challenging the legality of subsidies provided to patients to purchase insurance through the healthcare exchanges.

According to an article in the Washington Post, their main argument rests on semantics, stating that language in one portion of the bill implies the subsidies are only valid in states that have set up their own exchanges.

Here’s the problem with that interpretation: 34 states haven’t set up their own exchanges. Patients in those areas who purchase exchange plans are taking advantage of the federal exchanges. If the High Court decides these subsidies are invalid in those states, many patients will no longer have insurance.

The feds have said that, when they created the law, their intent wasn’t to limit the subsidies to state-run exchanges. They recognized many states would opt out of establishing their own exchanges, leaving residents to use the federal exchange to purchase insurance plans.

Effect on hospitals

Since the subsidies have been implemented, they’ve helped hospitals reduce their debt burden from providing patients with uncompensated charity care. And that would all end if patients lose their access to healthcare subsidies.

According to a fact sheet from the American Hospital Association, hospitals have provided over $459 billion in uncompensated care to patients over the past 15 years. In 2013, the most recent year for which specific numbers were available, hospitals provided $46.4 billion worth of uncompensated care, representing nearly 6% of their total expenses for the year.

Thanks to healthcare reform, those amounts have been projected to get even lower. A recent report from the Department of Health & Human Services (HHS) estimated that hospitals saved $5.7 billion in uncompensated care costs last year.

Given those numbers, it’s likely that preventing patients from using subsidies will hurt hospitals’ budgets almost immediately. Although plans may be made to keep patients with exchange plans insured for a short time should the subsidies end.

Positive outlook

Early indications are the court has a favorable view toward keeping the subsidies, and for now, many healthcare executives and experts are optimistic that there won’t be any major changes to the ACA, according to an article in Reuters.

But only time will tell just how much the decision for King v. Burwell will affect your hospital’s bottom line. The Supreme Court is set to make a ruling on the case by this summer. We’ll keep you posted on the outcome.

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