Like the Affordable Care Act and other landmark social spending measures before it, the human infrastructure bill now in Congress, the Build Back Better Act, would lower barriers to affordable healthcare for millions of Americans. That's a praiseworthy goal and one that safety-net hospitals welcome as they care for the nation's low-income and marginalized patients.
But those same hospitals could fall victim to another trait the Build Back Better Act shares with the ACA: a rosy coverage forecast that experience tells us can fall short of expectations.
In the dozen states that have rejected Medicaid expansion, the act would extend ACA marketplace coverage to people who fall in the coverage gap—those with incomes too high for Medicaid eligibility but too low for ACA marketplace tax credits. But it's a double-edged sword for hospitals with a safety-net mission: The Build Back Better Act also would cut payments that support safety-net care in these states, based on the assumption that more insured patients would offset the loss.
The ACA took a similar tack, albeit on a national scale. On the chopping block, in both cases, are Medicaid disproportionate share hospital (DSH) payments, a lifeline for hospitals that care for large numbers of uninsured and underinsured patients. The Build Back Better Act would go further and restrict federal contributions to funding pools that several states put toward hospitals' uncompensated care costs.
For all the good it has accomplished—including adding tens of millions of Americans to the ranks of the insured—the ACA has yet to meet the coverage predictions of its framers. Yet, baked into the law are dramatic cuts to Medicaid DSH justified by those original estimates. Recognizing the disparity between what was envisioned and what came to be, Congress wisely delayed the Medicaid DSH cuts and, more recently, eliminated portions entirely.
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This experience makes it all the more frustrating Congress and the administration are poised to repeat history with the Build Back Better Act. The projected $4.7 billion in DSH cuts it would make and additional reductions to the uncompensated care pools fail the test of sound policy on multiple counts.
Chief among arguments against the cuts are that they would punish hospitals for state policy decisions outside their control and, in turn, harm the very patients the act aims to help. The Build Back Better Act wields a stick against the expansion holdout states but strikes it squarely on providers that had little say in the expansion decisions. Worse, by cutting support vital to the safety net, the act would jeopardize care for people of color and others who have suffered disproportionately during the pandemic, eroding gains in equity coverage expansion might achieve. The legislation also would have the perverse effect of making hospitals with the fewest resources and poorest patients pay for expansion—hardly something that promotes equity.
The cuts fail in other ways. The policy would make no allowances for fluctuations in the Medicaid population or costs of uncompensated care (the ACA took the same approach to its Medicaid DSH cuts). Further, it would force significant and costly changes without data to show such disruptions serve the best interests of Medicaid or its beneficiaries. The policy also would set a troubling precedent of penalizing states for choosing not to act on an optional plan design.
Compounding all this is the likelihood hospitals that need safety-net support the most won't see the increase of commercially insured patients the Build Back Better Act promises. The Urban Institute examined this question recently and concluded the act's benefits "would not necessarily go to the same hospitals that would sustain reductions in DSH allotments. Thus, some hospitals may be worse off with the proposed changes." That's not encouraging, especially as essential hospitals continue to struggle with the heavy financial losses of combating COVID-19.
As policymakers work to bring healthcare coverage to more people, they must remain clear-eyed about the prospects of reaching everyone and mindful of the need for a strong safety net when hope falls short of reality. They can start by rejecting the hospital cuts in the Build Back Better Act.
