August 2013 Review – Health on the Hill

The 2010 Patient Protection and Affordable Care Act was enacted with assumptions that health insurance coverage would expand. As an offset to coverage expansion, provider payments were to be reduced over time, presumably corresponding with increased levels of Medicaid, health benefit exchange or private sector insurance coverage.

Those assumptions are unlikely to be met under current circumstances. Some or all of the payment reductions, either Medicare or Medicaid, will continue apace. These reductions include Medicare and Medicaid disproportionate share payments to hospitals and across-the-board Medicare payment cuts for hospital services.

The Medicare patient rate cuts exceed the Medicaid reductions. Virginia’s hospitals’ and health systems’ share of Medicare cuts – just for inpatient hospital services – is $2.95 billion from 2010-2019. As these cuts will be phased in, payments decrease more each year. In 2019, the reduction in payments for Medicare services to Virginians is estimated to be almost $700 million, an astoundingly large number. On top of all of this is a two percent annual across the board Medicare payment reduction as a result of sequestration.

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