Some “Unanticipated” Consequences of Obamacare

Among the consequences are the popularity of high-deductible health plans and out-of-pocket costs that’s led to an increase in bad debt for hospitals and physician practices.

OPINION -- When one hears criticisms of Obamacare, one does not generally hear people complain about the fact that they may be able to include their 26-year-old children on their health plan, that certain limitations on coverage and amounts have been increased or eliminated, that their pre-existing conditions do not create the same problems for them as in the past. And for some people, we do not hear that they cannot procure coverage at all.

We do hear that many of the plans are high-deductible plans where individuals and families that are covered are not able to pay for the deductible and out-of-pocket amounts, and they are in many instances still afraid to access the system, for fear they will incur obligations for which they will not be able to pay. We also hear that a number of individuals cannot locate a provider that will take them as a patient. On balance, however, when one speaks with these individuals, they believe they are better off than before. Were these consequences anticipated or not, I do not know, but perhaps.

What is disconcerting from the perspective of one that has been involved in the healthcare industry and its financing in various forms for over 35 years is that although many more individuals are covered by a form of health insurance and the percentage of a hospital’s patients that do not have coverage has gone down as The Lund Report has reported on for some time now, high-deductible health plans seem to be increasingly popular. However, many individuals and families are not able to meet their obligations for the deductibles and out-of-pocket amounts. The result appears to be an increasing amount of bad debts for hospitals and physician practices. Whether this was anticipated or not may be unclear, but it might be considered a consequence of the change in the system. On balance, one would assume that providers are getting paid more because they may be getting paid something for their services for more people. And of course, those beneficiaries who can access the system without going directly to the Emergency Department should be much better off from a health perspective, if not from a financial perspective.

Nonprofit hospitals that are tax-exempt typically tout the charity care that they provide as one of the reasons that they should be entitled to their tax-exempt status. Other reasons include, but are not limited to the education and research that they may embark upon. These latter two areas are generally very important in academic medical centers. When individuals have health insurance, they may not qualify for charity care. If they do not, and they have high deductible health plans where they cannot pay all or part of their deductible or out-of-pocket amounts to a hospital, these amounts may be seen as bad debts. Given that bad debts are generally not considered charity care, the amount of charity care that many hospitals have provided under Obamacare seems to have gone down. Will such hospitals that now provide less charity care and do not provide sufficient education and research in the eyes of the Internal Revenue Service and/or state and local entities that afford them tax relief because of their nonprofit status now face challenges to that status? Should they try to figure out ways to provide charity care to individuals with high- deductible health plans, if that is even possible? And how might they do that and will those ways really be seen as charity care? Will they expand their educational offerings and research, or initiate same if they are not doing so now?

It will be interesting to see where this debate goes since it appears that both the Democratic and GOP candidates for President want to either expand, revise, or eliminate Obamacare. How they address these issues, if at all, and its interplay from a tax-exemption perspective could be most interesting for 2017 and beyond.