White Paper:  Low Medicare, Medicaid Payment Levels Create Financial Challenges for U.S. Health Providers

New research suggests that U.S. healthcare providers will face increasing financial challenges in the near future because of a change in patient demographics and Medicare payment reductions under the Affordable Care Act.

A white paper released by the L.E.K. consulting firm and discussed in the Indianapolis Business Journal projects that the percentage of hospital revenue from patients with private health insurance will shrink in the near future from 50 percent to 40 percent.  This is a result of the population aging and more citizens becoming Medicare-eligible as well as the expansion of Medicaid in many states.

This means, according to the paper, that Medicare will increase from 30 percent to 40 percent of a typical hospital’s revenue mix at the same time that cuts in Medicare reimbursement will mean that the program pays 90 percent of the actual cost of care instead of the current 95 percent.  (Medicaid pays approximately 65 cents of an actual dollar’s worth of healthcare services)  Even with a reduction in the uninsured population, the analysts project these changes will result in a net financial loss for the average hospital.

Analyses like these are vital for policymakers to understand as they debate the financial impact of the Affordable Care Act and future Medicare and Medicaid reimbursement policies.