Healthcare In Crisis: Moody's warns of trouble for hospitals without Medicaid expansion

Sunday, March 17, 2013

Moody's warns of trouble for hospitals without Medicaid expansion

Analysts with Moody's Investors Service warned that U.S. hospitals will be hurt unless states choose to expand Medicaid under President Obama's healthcare law.

A report from the credit rating agency predicted state governments will come under pressure from hospitals as the federal government cuts their disproportionate-share (DSH) payments, which are disbursed to help hospitals cover the cost of charity care for the uninsured.

The law mandates a decline in DSH payments under the assumption that most uninsured people with gain coverage through the individual mandate or the Medicaid expansion.

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But the Supreme Court's decision to uphold the Affordable Care Act made that expansion optional, and 14 governors have chosen not to pursue it, citing cost concerns.

These states will face "budgetary strain" one way or the other, said Nicole Johnson, a senior vice president with Moody's, on Thursday.

"States that opt out of Medicaid expansion will have to choose whether to compensate for the shortfalls with their own funds or leave hospitals to absorb the costs, which will increase rating pressure on the hospitals," Johnson said in a statement.

Several GOP governors have chosen to back the Medicaid expansion under pressure from hospitals and in spite of their past criticism of the healthcare law.

In Arizona, for example, Gov. Jan Brewer (R) is working with Democrats and the healthcare community to push Republicans to accept the massive federal grant that would accompany fuller Medicaid rolls.

Moody's predicted that DSH payments would fall by $17 billion by 2019. The reduction starts in October.

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Statistics Collection

80 percent of the hospital closures nationwide occured in states that didn’t expand Medicaid. 2019
About 75,000 patients with hospital-related infections died in 2011.
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