Hospitals Continue to Face Significant Underfunding from Medicaid and Medicare

January 28, 2021

Hospitals in Wisconsin and nationwide continue to deal with significant shortfalls from government-funded Medicare and Medicaid programs according to a new report from the American Hospital Association (AHA).

The AHA's Annual Survey of Hospitals for 2019—the most comprehensive financial survey of hospitals nationwide—collects data on an extensive array of topics, including government underfunding of medical services. The updated annual report shows that in 2019 Medicare underpaid hospitals by nearly $57 billion nationally, which is very similar to the level of Medicare underfunding from 2018. A recent Wisconsin Hospital Association (WHA) survey of Wisconsin hospitals and health systems showed that Medicare underpayments have steadily grown in Wisconsin from $2.2 billion in 2017 to $2.5 billion in 2018 and $2.6 billion in 2019. Over the same time period, Wisconsin hospitals’ uncollected bad debt also grew from $215 million in 2017 to $228 million in 2018 and $236 million in 2019. This is not surprising, as aging demographics mean that more Wisconsinites are shifting from commercial health insurance to Medicare, leading to hospitals caring for more patients at rates that do not cover the full cost of care. 
Wisconsin’s Medicare and Medicaid reimbursements continue to lag behind national averages. Nationally, Medicare paid about 87 cents for every dollar of care and Medicaid paid about 90 cents according to AHA's survey. WHA's own annual survey showed that Wisconsin hospitals received roughly 73 cents for each dollar of care provided under Medicare and 66 cents on the dollar under Medicaid. This failure by the government to pay the full cost of care results in a hidden health care tax on everyone else, creating a cost shift in the form of higher health insurance premiums for businesses and individuals. 
In recent years, WHA has successfully advocated for growing Wisconsin’s Disproportionate Share Hospital (DSH) and Rural Critical Care (RCC) Medicaid supplemental payments, which help hospitals that see large numbers of Medicaid patients offset a portion of these losses. WHA continues to advocate for strengthening and protecting these programs that help Wisconsin maintain its well-deserved reputation for high-quality, high-value health care.

This story originally appeared in the January 28, 2021 edition of WHA Newsletter