In this challenging economic climate, one topic that needs more attention is government’s under-funding of Medicare and Medicaid, which costs private businesses more than half a billion dollars a year as a hidden healthcare tax.
For years, the government has under-funded Medicare and Medicaid reimbursements to physicians and hospitals resulting in huge shortfalls in the cost of providing care. This results in what is known in the industry as cost shifting, where government payment shortfalls get shifted to others who pay. The “others who pay” represent the private sector, namely businesses, that offer commercial insurance products to their employees.
In 2007, according to the Nevada Hospital Association, Medicaid paid only 70 percent of what it costs hospitals to care for patients. Hospitals are also coming up short when trying to pay for the cost of care for Medicare and the uninsured. In Nevada, as many as two-thirds of a hospital’s patients are in programs that do not cover the cost of the healthcare provided. The remaining one-third is made up of people with private insurance who essentially end up paying for their own care and the shortfalls in these other areas. So a dollar increase in hospital costs can translate to potentially as much as a three dollar increase for business and privately insured patients.
In 2007 in Nevada, it was estimated that shortfalls to hospitals translated into a $476 burden for every privately insured resident, or $1,940 for a family of four.
Another major concern is that Nevada’s Medicaid program eligibility results in a smaller percentage of covered individuals. In fact, Nevada is among the worst in the nation in terms of the number of persons covered under the Medicaid program. The state’s seven percent of the population covered pales in comparison to the 13 percent national average. This rigid program eligibility leaves residents without coverage and without access to the healthcare they need. Even if a person qualifies for Medicaid, they may have trouble getting an appointment. Fewer and fewer physicians can afford to add new patients when the Medicaid reimbursement falls short of their costs.
Not surprisingly, the restrictive eligibility standards of Nevada’s Medicaid program aggravate Nevada’s uninsured problem. The state’s 18 percent uninsured rate puts the state 43rd out of 50 states.
All of this under-funding results in a vicious cycle. When government reimburses below cost, this inflates prices for the private sector. If businesses can’t afford the ever-escalating insurance premiums, they are forced to reduce or even eliminate coverage for their employees, which in turn increases the number of under- or uninsured.
In 2007, Nevada hospitals were underpaid by $714 million (shortfall compared to their costs). This dire situation makes it impossible for hospitals to fund the expanded capacity and new services required to keep up with the needs of Nevada’s rapidly growing and aging population.
As the state struggles to balance its budget by reducing Medicaid rates, the impact on our communities will be double. For every 50 cents the state cuts, Nevada communities lose a total of a dollar due to a loss in the federal match. We are leaving federal help on the table. Since the cost to care for these patients will still be incurred, businesses and the privately insured will once again shoulder the burden.
The time to act is now. Encourage your representatives to fund Medicaid adequately, to cover more individuals and to quit passing these responsibilities on to private business. Let’s address the hidden healthcare tax on business before our healthcare insurance becomes even more unaffordable and access to healthcare in our communities is jeopardized.