Lowering Hospital Bills by Reducing Uncompensated Care

The Affordable Care Act (ACA) ushered in a number of important reforms: insurance companies can no longer deny care to someone because of a preexisting condition; they can’t drop someone if he or she gets sick; and children can now stay on their parents’ plan until age 26. The Affordable Care Act was also designed to expand access to affordable and quality health coverage, and to reduce the significant cost-shifting that drove up health care costs pre-ACA.

Before the ACA, people who didn’t have insurance—and who couldn’t afford to pay out-of-pocket—would show up to hospitals for care. Hospitals would then shift the huge costs they incurred from providing uncompensated care onto the rest of us via higher bills. As more people are insured because of the ACA, fewer people without insurance will show up to the hospital in need of care. Reducing uncompensated care will mean fewer costs that have to be passed on to everyone else, and that will mean lower hospital bills.

We know that more than 330,000 Marylanders have enrolled in coverage since January 1 (exceeding our goal of 260,000). We received some early data in March to show that uncompensated care already was on the decline in Maryland. And yesterday, we received even more data: for the first quarter of 2014, hospitals saw 62% fewer charity cases and 24% fewer self-pay cases, compared to the first quarter of 2013.

Maryland’s unique system of setting hospital rates means that less uncompensated care translates directly into lower hospital bills. Officials on the rate setting commission said they plan to take 1% off of their planned rate adjustment in July because of a reduction in uncompensated care. There is now optimism that rates could be driven down even farther.

Tom Mullen, the widely respected CEO of Mercy Medical Center, summed the news up this way to the Baltimore Sun: “It’s very positive. Having more people covered is good. In Maryland, everyone benefits.”

Joshua M. Sharfstein, MD, Secretary
Department of Health & Mental Hygiene