PREPARED FOR The Commonwealth Fund PRESENTED BY Al Dobson PhD June 20 2017 To examine how the AHCA Medicaid provisions which are estimated to reduce federal Medicaid spending by 834 billion over ten years will impact the financial ID: 613552
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Slide1
Financial Impact of AHCA Medicaid Provisions on Safety-Net Hospitals
PREPARED FOR:
The Commonwealth Fund
PRESENTED BY
:
Al Dobson,
Ph.D.
June 20,
2017Slide2
To examine how the AHCA Medicaid provisions, which are estimated to reduce federal Medicaid spending by $834 billion over ten years, will impact the financial
stability
of safety-net hospitals Safety-net hospitals were defined as acute care hospitals meeting the “Deemed DSH Hospital” criteriaDobson | DaVanzo Hospital Financial Simulation Model (HFSM) used to estimate the financial impact on these hospitals due to the AHCA Medicaid provisions
Purpose
© 2017 Dobson DaVanzo & Associates, LLC. All Rights Reserved.
2Slide3
Five key Medicaid provisions under the AHCA were modeled and their impact on safety-net hospital net income was measured relative to current law
AHCA Medicaid Provisions will Negatively Impact Safety-Net Hospital Net Income
© 2017 Dobson DaVanzo & Associates, LLC. All Rights Reserved. 3
AHCA Medicaid Provision
Excess Income/(Loss) (millions)
Current Law
$74,064
Eliminating Individual Mandate and Medicaid Expansion
($19,444)
Eliminating Medicaid DSH Reductions$13,711 Eliminating 3-Month Retroactive Eligibility($13,263)Imposing Per-Capita Spending Limits($3,646)Safety-Net Funds to Hospitals in Non-Expansion States$4,365 Total Effect of All AHCA Medicaid Provisions Modeled($18,277)
Source: Dobson | DaVanzo analysis of Medicare Hospital Cost Report Data for 2015
Change in
Net Income for
Safety-Net
Hospitals
Due
to AHCA Medicaid Provisions (2017 – 2026
)Slide4
By 2026, we project total margins for safety-net hospitals to be near zero as well as a substantial decline in operating margins
AHCA Medicaid Provisions will Negatively Impact Safety-Net Hospital Margins
© 2017 Dobson DaVanzo & Associates, LLC. All Rights Reserved. 4
Source: Dobson |
DaVanzo
analysis of Medicare Hospital Cost Report Data for
2015
Projected Total and Operating Margins for
Safety-Net
Hospitals 2015 - 2026
Total MarginsOperating MarginsSlide5
Projected Total and Operating Margins for Safety-Net Hospitals
in Expansion and non-Expansion States 2015 – 2026
Safety-Net Hospitals in Expansion States will Experience Largest Impact© 2017 Dobson DaVanzo & Associates, LLC. All Rights Reserved. 5
Source: Dobson |
DaVanzo
analysis of Medicare Hospital Cost Report Data for
2015
Medicaid Expansion States
Non-Expansion States
Total Margins
Total MarginsOperating MarginsOperating MarginsSlide6
Safety-net hospitals ranked highest to lowest based on hospital’s proportion of low-income patients treated
Those in highest
tercile have the lowest operating and total margins under current law, and will experience the greatest negative impact from the AHCA, regardless of whether they are located in a Medicaid expansion or non-expansion state.Safety-net hospitals with highest proportion of vulnerable patients will be hit hardest
© 2017
Dobson DaVanzo & Associates, LLC. All Rights Reserved.
6
Total
Margin in 2026
Operating
Margin in 2026Proportion of Low-income Patients(1)Current Law(2)After AHCA(3)Percentage Point Change(4)Current Law(5)After AHCA(6)Percentage Point ChangeSafety-Net Hospitals in Medicaid Expansion States
Total
2.7%
-0.5%
-3.2%
-4.6%
-8.5%
-3.9%
Lowest Tercile
5.5%
3.6%
-1.9%
0.7%
-1.6%
-2.2%
Middle Tercile
0.7%
-3.5%
-4.1%
-5.6%
-10.4%
-4.9%
Highest Tercile
0.0%
-4.7%
-4.7%
-12.3%
-18.6%
-6.3%
Safety-Net Hospitals in Non-Expansion States
Total3.2%2.2%-1.0%-2.0%-3.1%-1.2% Lowest Tercile5.4%4.8%-0.6%1.9%1.2%-0.7% Middle Tercile2.3%1.1%-1.1%-3.2%-4.5%-1.3% Highest Tercile2.0%0.5%-1.5%-4.8%-6.6%-1.8%Total2.9%0.5%-2.4%-3.6%-6.4%-2.8%
Source: Dobson | DaVanzo analysis of Medicare Hospital Cost Report Data for 2015Slide7
We estimate that by 2026 total margins would drop to 0.5 percent compared to current law estimates of 2.9 percent
(83% reduction).
Safety-net hospitals in Medicaid expansion states would experience the largest negative impact on margins under the AHCA - particularly, small rural hospitals as well as small and mid-size urban hospitals. Safety-net hospitals in states that expanded Medicaid may see uncompensated care costs more than double compared current law by 2026. Safety-net hospitals that have the highest commitment to serving low-income and Medicaid
patients tend to have the lowest operating and total margins under current law and will
be negatively impacted the most by the AHCA.The diminished financial stability of safety-net hospitals under the AHCA
not
only
affect the
institutions and Medicaid
patients,
but affect the entire community served by these hospitals.Key Findings© 2017 Dobson DaVanzo & Associates, LLC. All Rights Reserved. 7