Medicaid Rates So Low, Hospitals Consider It Charity Care
Most hospitals have slim margins, and budgets are set based on anticipated average patient reimbursement at Medicare rates. Some private insurers pay higher rates than Medicare, and the differential is often used to offset the cost of treating Medicaid patients. Medicaid reimburses at about half what Medicare pays, which is usually not enough to break even. Out of financial necessity, Medicaid patients are often given limited access to care and services. This is done in some subtle and some not-so-subtle ways. In a recent conversation with an orthopedist friend of mine, he confided in me candidly:
“Some of my colleagues in private practice can’t pay their office overhead if they treat Medicaid patients. So we see poor people with severely arthritic joints left in pain at home. In addition, with bundled payments, the surgeon gets a fixed amount for the patient’s operation and recovery. What incentive is there to send the patient to a rehab facility? It just takes money away from the surgeon. So the poor have to suffer with very long wait times to see someone who will operate on them, and then afterwards they’re on their own for recovery. Patients who go straight home are at higher risk of falling and may have much poorer outcomes. Surgeons get financial incentives for good outcomes, so it becomes a double disincentive to treat Medicaid patients. You don’t get enough for the operation, and you’re likely to get penalized for their poorer outcomes. Some surgeons I know wont touch a patient with Medicaid for any elective procedure. I have ethical problems with that – so I work at a non-profit hospital where we treat everyone. But I have to do higher volume to break even. I work 90 hours a week and barely see my family. I don’t know how much longer I can do it.”
It is common practice among nursing homes to have a limited number of “Medicaid beds.” The facility simply declines to admit more than 20% of patients with Medicaid. I hear case managers on the phone all day long, looking for a post-acute care facility who will accept a Medicaid patient. For the few non-profit facilities who don’t turn them away, deep financial costs are incurred as they struggle for survival.
The reality is that Medicaid rates are so low that having this insurance is not much better than none at all. As I’ve explained previously in the outpatient world (see an example of an insanely low Medicaid reimbursement for eye care), Medicaid is tantamount to charity care. The news that 21.3 million Americans might receive Medicaid coverage in the next decade should not be hailed as a leap forward. As I see it, that’s just a larger group of people with debilitating arthritis who can’t get hip and knee replacements and are left to suffer in pain at home.
