Massachusetts Uncompensated Care Pool Abused by Hospitals

Published July 29, 2011

New evidence indicates a major portion of Massachusetts’ uncompensated care pool went to subsidize the state’s Medicaid program during the past decade, primarily through sloppy practices, lack of oversight, and overcharges—a problem which may become national under President Obama’s health care law.

The uncompensated care pool is the fund used to reimburse health care providers, mainly hospitals, who provide care to individuals who refuse or are unable to pay. As hospitals sought to replace their losses from reduced Medicaid payments, they increasingly turned to the uncompensated care pool.

A Massachusetts Office of the Inspector General investigation found a substantial fraction of the pool’s payments were subsidizing the state’s “inadequate Medicaid payments” and the pool’s “current system cedes complete autonomy to hospitals to set their own fee schedules and—despite legislative mandates to the contrary—never questions hospitals’ charges to the Pool.”

Replacing Lost Medicaid Dollars

According to Joshua Archambault, program manager for health care at the Pioneer Institute, a Massachusetts-based think tank, the uncompensated care pool was ripe for abuse.

“When the 2006 Massachusetts health care reform law was being debated, the Romney administration looked at the situation and said of the uncompensated care pool that it is not only an ineffective and not a transparent way of providing health care to folks who are uninsured, but there are all sorts of questions about how you go about getting reimbursed,” Archambault said.

The problem was that Massachusetts, Archambault claims, fell down on oversight of the pool.

“Part of the legislation was a requirement for a state agency to set up a way to verify people that were getting care under the uncompensated care pool, to verify whether they were insured or not, to verify whether they deserved to get free care,” Archambault said.

Too Many Patients to Track

Tracking the status of patients proved too difficult and costly, Archambault said.

“The state agency started that process, said it was too hard, and stopped,” said Archambault. “So there is no verification process right now, and as a result it is an easy way for some hospitals to take advantage of it. They don’t ask any questions, they basically just say, ‘We’re getting under-reimbursed by Medicaid, we don’t have as many folks on private insurance to cost-shift onto like other hospitals, so this is one way for us to get some money back.'”

Archambault says the temptation to cheat is still in place.

“The uncompensated care pool is about $400 million annually still. It was never supposed to be that high, at this level, five years out. It was supposed to be much, much smaller,” Archambault said. “It was only supposed to be for folks that didn’t have insurance. Maybe they were here visiting from out of state and they didn’t have insurance and there was no way to collect from them, so the hospital would have access to the uncompensated care pool.”

Could Become a National Issue

Devon Herrick, a senior fellow at the National Center for Policy Analysis, says the federal government had a hand in causing the problem. “The federal government was pressuring Massachusetts to make Medicaid changes” at the time of the 2006 debates over Romney’s law, he said. Herrick notes this problem could increase under Obama’s health care law.

“Over the course of 2011 to 2019 under Obama’s law, varying by year, the Disproportionate Share Hospital fund, for those that treat a disproportionate of indigent patients, is slated to be cut by a quarter. So a lot of the safety net hospitals are seriously worried,” Herrick said.

Herrick maintains this could become a more significant problem in the future, with so-called safety net hospitals bearing the brunt.

“Theoretically if you have more people who are covered by insurance, you don’t need as much charity care. But those that are treating those patients are not necessarily sure they will come out even on that deal,” Herrick notes.

Of safety net hospitals, Herrick said, “I suspect a lot of them will get killed.”


Loren Heal ([email protected]) writes from Neoga, Illinois.

Internet Info:

Massachusetts Inspector General Report: “Ongoing Review of the Uncompensated Care Pool”: