Health Insurance Public Policy

The Cost of Uncompensated Care

Because it expands health insurance coverage, one of the key effects of the recently passed health reform bill is that it will decrease the amount of compensated care.  According to an Urban Institute study:

…the cost of uncompensated care will fall from $62.1 billion in 2009 to $46.6 billion in 2019 under the Senate bill, and to $36.5 billion in 2019 with the House bill…Without reform, the cost of uncompensated care will increase to between $107 and $141 billion in 2019, depending on growth in the economy and health care costs.

Who currently pays for uncompensated care?  This chart provides a breakdown.  Surprisingly, physician’s in-kind free treatment makes up only 14% of uncompensated care.  On the other hand, Medicare and Medicaid fund the largest share of uncompensated care.  The reason for this is that Medicare has a disproportionate share hospital (DSH) payment program indirect medical education payments and Medicaid also has a DSH program as well as supplemental provider payments programs.  The authors count these programs as payment for uncompensated care.  The DSH payment system doesn’t make much sense to me.  If, Medicare or Medicaid payments are too low, why not raise the reimbursement rates rather than give lump sum handouts to hospitals in the form of a DSH payment.

State and local government also pay for a large share of uncompensated care.  In California, county-financed clinics are the last refuge for those without insurance, especially for undocumented immigrants.  According to the study, state and local governments pay for about 18% of unfunded care.


  1. I suspect that a higher percentage of physicians who work at facilities that provide uncompensated care are employees. I assume this uncompensated care would count as a facility loss.


  2. At best, isn’t this just shifting the expense from the current various sources to the new subsidies? At worst, shifting and increasing the health care spending of the formerly uninsured? The net government spending on this subset of the population is not actually decreasing. What am I missing?

    Basing my statements on a KFF study of the uninsured from 2008:

  3. I think hospitals are more politically palliatiable for funds than Medicaid.
    Nobody wants to give extra ot those perceived as not working for their keep, but hosptials, neighborhood employment centers, aren’t seen quite the same way.

  4. I’m not sure that we can accurately predict these numbers going forward. Even if health insurance is subsidized to some extent – there will be many who choose not to purchase it.

  5. Actually the employment status of physicians and other health care providers who treat patients with unfunded costs is of relatively little consequence.

    All health care providers are held accountable for the costs of the care they provide. The real problem is that health care providers across the board try to minimize their exposure to such costs and this can only be accomplished by delaying and denying care to their patients.

    So, let’s imagine what happens when a physician is standing across from a patient who needs open heart surgery but came in complaining about the flu. Does the health care provider tell the patient that they need open heart surgery, aggressively treat the patient, and assume the onus of the burden for costs to themselves or their facility? Or, does the health care provider mention that the flu seems to be going around, write out a prescription for common antivirals, and other symptomatic relief?

    If the health care provider aggressively treats the costs may be in the tens of thousands of dollars and you better believe these costs will be noted and critiqued by professional peers and finance and accounting personnel. These costs will influence monthly, quarterly, annual, and lifetime cost reports for the deemed responsible provider and will also affect retention, promotions, and partnership decisions.

    Providers that repeatedly aggressively treat patients without the ability to pay suffer greatly.

    Eventually such providers learn what others already accepted, if the health care provider blows the patients off the costs are nil.

    Just make sure your level of entitlement to health care is tattooed on your forehead or you might just receive a lower level of care if you are hit by a car and picked up unconcscious and transported to an ER sans IDs.

    The moment when you most need your health care benefits is not necessarily going to have been the moment you expected to need them. God laughs as much about our sense of predictability as he does about our life plans.

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