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Second in a series of papers on Public Policy Issues in the Financing of Michigan Hospitals
HEALTH INSURANCE COVERAGE AND UNINSURED/
About the Michigan Data
The following tables, charts and analyses are based on information filed for two recent fiscal years. Cost and Indigent Volume reports were filed for 170 hospitals for the periods in this report: 20 of which are not included.
Hospitals Not Included in the Memorandum
Hospitals Without Some Data Available for Both Years:
Hospitals that Closed Between 1998 & 2000:
The 2000 data is for the period October 1, 1999 through September 30, 2000. Hospital fiscal years end at different times (most are either December 31 or June 30) so that the impact of a particular federal or state policy change or reimbursement alteration or change in economic climate can be reflected unevenly in the data of different hospitals.
Uninsured charges are divided into three categories: charity, patient pay and state or local programs. The charity designation indicates that the hospital did not bill for the service and treated the costs as charity from the time of service. Uninsured patient pay represents charges for care given to persons without insurance who are billed for the care but who may or may not fully pay for it. Charges for persons covered by a state or local program, such as state prisoners receiving surgery at a local hospital, are reported separately as uninsured.
Some hospitals have a policy to bill for all care. Care that another hospital might categorize as charity is thus reported as an uninsured patient pay amount. This memorandum combines the three categories.
Hospitals also report charges for services to insured persons that are not fully paid. These are called uncompensated and often consist of unpaid deductibles and co-payments for both governmental (Medicare) and private insurance programs.
Michigan hospitals are required to file an Indigent Volume report along with the Medicaid cost report every year that is used to calculate a special payment, which totaled $45.0 million in 2000 to the 47 hospitals determined to be providing a disproportionate share of care to indigent persons. Because some two-thirds of the hospitals do not receive payments as a result of filing the report and because not all reports have been independently audited, it is possible that information is not as accurate as it might otherwise be. The data has been submitted to the state by each facility and represents information in hospital files.
Table 3 shows year 2000 total uninsured and uncompensated charges, costs and recoveries and offsets for the 150 hospitals covered in this Memorandum.
Total hospital charges for uninsured and uncompensated care in 2000 were some $1.1 billion. The costs associated with these charges were $620.0 million and hospitals received $163.8 million in funds against these charges. The resulting net cost was $456.2 million.
Table 4 is a listing of individual hospitals.
NOTE: This table shows the cost of uninsured and uncompensated care. Where payments exceed cost, the number is shown as a negative amount.
One hundred twenty-eight facilities did not recover the cost of uninsured and uncompensated care, 10 reported none in either category, and 12 show payments for the uninsured, recoveries and offsets exceeding the cost of uninsured and uncompensated care due either to payments by uninsured persons exceeding costs or because of timing differences between the provision of services and receipt of payment, or both.
Table 5 shows the impact of uninsured and uncompensated cost on the financial results of each hospital in state fiscal year 2000. Had these hospitals not experienced the financial results of uninsured and uncompensated care, the overall surplus would have been $1.1 billion rather than $635.4 million.
In the late 1960s, the state designated 8 health systems planning areas. Table 6 reflects uninsured and uncompensated data for these areas with the City of Detroit separated from the Southeast area. The Southeast area and the City of Detroit (46.8 percent of Michigan's population) account for 68.7 percent of total net uninsured and uncompensated costs.
According to the United States Census Bureau, some 1 million of Michigan's 9.9 million citizens were not covered by health insurance for the entire calendar year 2000. This was down from a high of 1.1 million in 1998. Until 1998 the trend had been generally upward in both numbers and percent. There are indications that numbers may be on the rise again as a result of the weakened economy and the rising cost of health insurance.
While Medicare and Medicaid address the provision of hospital services for the aged and many without sufficient income to pay for services, there remains a substantial amount of hospital cost that is not reimbursed. In 2000, the portion identified as a result of uninsured and uncompensated care amounted to $1.1 billion in charges with a net cost of $456.2 million. The $456.2 million represents 3.1 percent of total net patient revenue and 74 percent of total hospital surpluses for 2000.
Some have suggested that the state should be the payer of last resort and reimburse hospitals for these unpaid costs. If the state were to enact a similar plan for hospitals as it has for nursing homes and managed care organizations (See CRC Note 2002-01) so that the resulting federal match was at the maximum payment level allowed by the federal government, hospitals would receive some $82.5 million in new funds. The current and foreseen shortfall in revenues necessary to continue current state programs (See CRC State Budget Notes) appears to preclude the use of general fund monies to address this issue.
Some Michigan counties have or are developing programs to assist local employers in paying for health insurance through what are known as 1/3, 1/3, 1/3 arrangements. Under these, the cost of health insurance is divided three ways among the employer, the employee and the county. It will be a few years before the impact of these initiatives are known.