Hospitals have to make up the reimbursement gap left by...

Hospitals have to make up the reimbursement gap left by Medicaid and Medicare by negotiating higher prices from commercial insurers. Credit: Getty Images/iStockphoto/jwblinn

New York has done an exceptional job of providing access to health care through low- or no-cost coverage. Our state has achieved nearly universal coverage through the expansion of Medicaid, creation of the Essential Plan for families with modest incomes, and establishment of its health insurance exchange.

This progress comes with a price, one the state has never fully paid. The Medicaid program, which covers about 40% of New Yorkers, only reimburses hospitals for 60% of the cost of care. Medicare rates don’t cover costs, either, though the gap isn’t nearly as large. Hospitals have to make up the difference by negotiating higher prices from commercial insurers. This impacts insurance premiums, but still doesn’t close the gap. Safety-net hospitals that disproportionately serve Medicaid and uninsured patients have even less ability to shift costs to private insurance, so they’re hit even harder.

This shortfall has consequences for all of us. A statewide survey last fall found that 85% of hospitals expected to have negative or unsustainable operating margins (the ratio of revenue to expenses) in 2022; in suburban regions, it’s 98% of hospitals. Compounded by the health care workforce shortage, nearly half of all hospitals in the state reported having to reduce or eliminate services. Seventy-seven percent have had to delay or cancel modernization projects.

Although hospitals are nonprofit institutions, they need to bring in enough revenue to cover costs, invest in their workforce, and upgrade facilities and equipment. Costs are rising across the board; the same inflation you see at the gas pump and checkout counter is hitting hospitals, too. Supply, pharmaceutical and energy prices have grown exponentially, and hospitals must keep salaries competitive to retain and attract workers. We are on an unsustainable path.

However, Medicaid rates have risen only 1% in a dozen years. Gov. Kathy Hochul’s budget proposal calls for a much-welcomed 5% increase in inpatient rates, but hospitals face a net reduction due to other proposed cuts and the increased MTA payroll tax. The budget also calls for adding new benefits and beneficiaries to Medicaid. While laudable, the cost of these expansions will again be borne, in part, by health care providers. The State Senate and Assembly in their budgets have responded to our call for an increase of 10%, the bare minimum needed to stop the bleeding. We also need a commitment to annual adjustments that keep pace with inflation.

The Legislature must act to make sure managed care plans pay their bills, too. Another Hochul proposal would require that insurers pay hospitals for emergency services already provided; any issues with details of a claim can be resolved in a post-payment review process. You wouldn’t think this needs to be spelled out, but the reality is that deep-pocketed health plans routinely deny and delay payment for medically necessary services while holding onto your premium dollars. Hospitals dedicate entire departments — resources better devoted to patient care — to chasing payments that insurers are obligated by contract to make. The Legislature has rejected this proposal. We urge them to reconsider. 

Whether covered by public or private insurance, we all have a stake in how New York funds health care, because everyone needs a hospital at some point in their lives. The quality and availability of services are significantly impacted by whether the state lives up to commitments it has made to Medicaid and holds insurers accountable. The state government and the health insurance plans it regulates must pay their bills.

This guest essay reflects the views of Wendy Darwell, president and chief executive of the Suburban Hospital Alliance of New York State.

This guest essay reflects the views of Wendy Darwell, president and chief executive of the Suburban Hospital Alliance of New York State.


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