What None of the Critics Understand About the Health Safety Net/Uncompensated Care Pool

The Health Safety Net (HSN, formerly the Uncompensated Care Pool) program, which reimburses hospitals and community health centers for some care provided to very low income patients, is under fire. A report by the Inspector General, later amplified in news reports (see here, and here) with details apparently leaked to the Herald that are not in the public record, accuse the program of paying improper claims for out-of-state residents, medically unlikely claims, and other concerns.

The outrage has gravitated to talk radio, which we understand is filled with invective about free care being provided to undeserving people. Today the Senate defeated budget amendments that took advantage of the outcry fed by the Herald’s charges.

Governor Patrick’s administration has pledged to strengthen the verification procedures that may need fixing. Last year the program issued a comprehensive report on their eligibility systems. The report makes clear that the program is working on additional integrity initiatives, including compliance review audits and patient monitoring.

But all of the criticism fundamentally misunderstands the purpose of the HSN program, who it serves and why. We want to provide some context that is missing in the discussion.

First, the HSN is a fixed pot of money, with hardly any funds coming from taxpayers. The sources of funds are an assessment on hospitals ($160 million); a “hospital sales tax” on payers of hospital services ($160 million), a special $70 million allocation of federal funds, and in some years, a bit of General Fund money. In 2009 it was $48 million, it was nothing in 2010, and this year it’s $30 million, which is the “standard” amount. That’s it. If there’s a shortfall, the hospitals just get paid less than they’re owed, according to a formula.

So any improper payments do not add to the cost to the taxpayers or to the Pool; the improper payments just shift around the fixed pot of funds.

Of course, this is not to defend improper payments. But we’ve not seen any acknowledgment of this fact. All the reports imply that taxpayers are paying more and more because of the problems. This is not true.

Second, the HSN is not an insurance program. The beneficiaries are hospitals, not the people using the services.

The purpose of the program is to somewhat equalize the burden among hospitals of patients who are unable to pay for their care. Massachusetts hospitals are committed to caring for all patients who need services, regardless of ability to pay. Because of geography, some hospitals are stuck with lots of non-paying patients, while others have relatively few. The HSN just shares the burden among all hospitals. Otherwise a hospital stuck with lots of unable-to-pay patients would have to raise their rates to those who can pay, while those with few uninsured patients would have an unfair advantage.

Low income uninsured and underinsured patients do benefit from having their care paid for by the program. HSN is the program of last resort for those with no other source of funds. But HSN primarily should be considered a program that more fairly shares the burden of these patients across hospitals and hospital payers.

This is also not acknowledged in the criticisms. When uninsured out of state people show up in Massachusetts emergency rooms, and the hospital tries to bill them repeatedly but can’t collect, someone has to eat the cost. HSN just spreads the cost among all hospitals and hospital payers, rather than force one hospital to absorb it all. But either way, the unpaid bill generated by the out of state patient is going to be dealt with somehow.

The program is far from perfect, and we have lots of ideas for making it more effective. But the vitriolic critiques (which have lots of other things wrong, too) come from a misguided starting place.
-Brian Rosman

About HCFA

The Ultimate Massachusetts Health Care Insider Information
This entry was posted in Health Care Politics, MA Health Reform. Bookmark the permalink.

2 Responses to What None of the Critics Understand About the Health Safety Net/Uncompensated Care Pool

  1. dennis byron says:

    You still have that economics problem, Brian. Who pays the hospitals that pay into the Free Care Pool? You and I either directly or via our premium dollars. (You and I had this same discussion but relative to another cost factor in the past.)

    You do make an important point that has been missed in almost everything else I’ve read however: the Free Care Pool probably helps the underinsured more than the uninsured.

  2. Brian,
    I understand your point that you think the health safety net trust fund is important, but you fail to acknowledge an economic flaw in your logic. Hospitals and insurers do not “pay” that assessment–we do.

    While it is not funded with direct taxes, “taxpayers” pay for the hospitals and insurers portion as well, it simply gets passed onto them in high costs. Don’t you think hospitals will charge more for services to make up the difference? Who pays that increase– patients and insurers. How do insurers make up their assessment fee and the hospitals higher prices? Increased premiums—which of course get handed down to taxpayers. I am not alone in believing this, almost every economist would agree with this cost-shifting principle, and hundreds of studies have been done to document it.

    It is the same flawed logic that we have for employer based insurance. Our company does not really pay for it, they simply lower our salary in order to provide it for us. While the fund should exist to help those most in need, and to reimburse hospitals for free care, a $430 million program in which 45% of those seeking free care reported no income. —no paycheck, no welfare, social security, no money coming in at all, private or public– a shrug of the shoulders is not the proper response from the leader of the Commonwealth. I hope we can both agree on that, and use the report as an opportunity to push for further reform.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s