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Uncompensated Care: Hospitals’ Billion Dollar Challenge

In 2014, U.S. hospitals were not paid for $27.3 billion of the medical treatment they provided. This is referred to as uncompensated care and is a major financial challenge for hospitals across the country.

Uncompensated care includes two categories of hospital expenses: charity care, which is budgeted for every year as a philanthropic initiative, and medical debt, which is not planned for and puts a significant strain on hospitals’ resources. The growing cost of uncompensated care caused by medical debt is in desperate need of a solution: the cost of care not reimbursed to hospitals has increased by roughly $6 billion since 2000.

Even as a growing number of patients have access to insurance through the Affordable Care Act (ACA), a trend that should theoretically reduce medical debt, the problem of uncompensated care continues to threaten hospital budgets. Here’s why:

  • High-Deductible Health Plans: To satisfy the health care law’s requirement to purchase insurance, some consumers chose plans with inexpensive monthly premiums but higher deductibles. When these patients get treatment they are responsible for costly medical bills that their insurance doesn’t cover, forcing providers to offer payment plans they don’t have the time or expertise to manage.
  • Inaccurate Paperwork: The massive influx of Americans getting insurance has inevitably led to paperwork discrepancies that easily trip up hospital billing systems. For example, while more than 8 million people became insured through the ACA, 800,000 of them dropped off in the first few months after enrolling. These patients may still have insurance cards that they can show to providers, even though that insurance is not active, which can result in uncompensated care.
  • Newly Insured Patients: People using insurance coverage for the first time are often unsure or misinformed about which costs they are responsible for paying. That confusion can lead to unpaid medical bills and frustration for patients who did not anticipate these bills and are not prepared to pay them. In states that expanded Medicaid, new patients may be covered retroactively for up to 90 days, but these costs can only be recovered if the hospital submits them to Medicaid manually, which is a time-intensive process.

Understanding the root causes of uncompensated care is critical to finding effective solutions. To learn more about uncompensated care and TransUnion’s solutions, read the latest Becker’s Hospital Review article: Capturing the lost dollar: Finding solutions for uncompensated care.