The healthcare reform mandate that nearly everyone have health insurance would benefit hospitals and is now more likely to take effect after President Barack Obama won re-election, Moody's Investors Service said in a report.
Moody's analysts said the mandate was “most at risk” in the campaign and its adoption is expected to increase demand for care from newly insured patients and reduce unpaid bills. But fewer write-offs from unpaid bills from the uninsured will not be enough to outweigh the Patient Protection and Affordable Care Act's scheduled Medicare cuts to hospital payments, which total $150 billion over a decade, Moody's said. The law also contains other provisions that will negatively impact hospitals' credit strength, including new penalties and payment models that will squeeze hospital revenue.
Health policy and funding remains uncertain as the president and Congress grapple with the nation's deficit and spending cuts, known as sequestration, scheduled to go into effect in January under the Budget Control Act enacted last year. Those cuts would reduce Medicare's pay to hospitals by 2%, Moody's said. “Even if the administration brokers a deal in the next two months that negates the sequester, there remains significant pressure to further reduce Medicare and other federal healthcare programs because of the magnitude of the federal deficit and the growth rate of healthcare spending nationally,” Moody's said.
Separately, Fitch Ratings
said its “view remains essentially unchanged” for health insurers following Obama's re-election and Democrats' continued control of the Senate. Insurers will benefit from more enrollees but will see pressure on margins from the health reform law's medical loss-ratio rule.