November Research Roundup: What We’re Reading

By Kennah Watts and Leila Sullivan

In November, CHIR was thankful for the latest health policy research. We read about charity care provided by non-profit hospitals, Marketplace coverage for small business and self-employed workers, and out-of-pocket costs of traditional fee-for-service Medicare versus Medicare Advantage.

US Nonprofit Hospitals Have Widely Varying Criteria To Decide Who Qualifies For Free And Discounted Charity Care

Luke Messac, Alexander T. Janke, Lisa Herrup Rogers, Imani Fonfield, Jared Walker, Elijah Rushbanks, Nora V. Becker, and Ge Bai. Health Affairs. November 2024. Available here.

Academic researchers from Brown, Harvard, Johns Hopkins, and University of Michigan collaborated with data experts from Dollar For – a nonprofit that reviews and catalogs hospital financial assistance policies – to analyze the Dollar For database and examine restrictions on charity care eligibility, including minimum bills, asset investigations, and citizenship requirements at non-profit acute care hospitals, as defined by the American Hospital Association Annual Survey. 

What it Finds

• Of the hospitals successfully linked between the survey and database, nearly 93 percent documented their charity care eligibility requirements.
• Almost 90 percent of the study hospitals specified the income limit to receive free charity care. The median income limit among these hospitals was 216 percent of the federal poverty level (FPL).
• Approximately three-fourths (77 percent) of the analyzed hospitals documented an income limit for discounted charity care, with a median income limit of 400 percent FPL.
  • Over 260 hospitals (8.8 percent) did not offer any discounted care.

• The median income limits for charity care varied by state: the median income limit in the lowest state (Montana, median income of 130 percent FPL) was less than half the limit in the highest states (California, Alaska, Oregon, and Washington with a median income of 300 percent FPL).
• Hospitals in wealthier areas and with favorable payer mixes offered more generous charity care: at the county level, the income limit for charity care increased as the share of the population below 150 percent FPL or the rate of uninsured people decreased.
• Insured patients can qualify for charity care at roughly one in ten (11.7 percent) of non-profit acute care hospitals, and of these hospitals, 4.1 percent required patients to meet some hardship criteria.
• Almost one in ten (8.4 percent) hospitals required documentation of citizens for patients to receive charity care.
• Two-thirds of hospitals (64 percent) included asset determinations in patient eligibility.

Why It Matters

Non-profit hospitals, which receive tax exemptions to offset the cost of providing community benefits, are expected to offer free or discounted care to low-income patients to help prevent large bills for hospital services and medical debt. While the Affordable Care Act (ACA) mandates that non-profit hospitals make their financial assistance policies public, it does not require specific provisions for charity care or define eligibility criteria. As a result, some hospitals may offer minimal charity care, which is not often proportional to the tax-exempt benefits they receive. In the absence of federal regulation, hospitals have significant discretion over who qualifies for assistance, and these policies are often opaque and difficult for patients to navigate. There has been increasing state and federal interest in particularly in relation to low charity care spending and the continued tax exemptions for non-profit hospitals. Policymakers should consider reforms to charity care limits and provisions to alleviate medical debt among consumers and promote cost containment.  

Marketplace Coverage of Small Business Owners and Self-Employed Workers

Assistant Secretary for Planning and Evaluation (ASPE), Office of Health Policy. November 1, 2024. Available here.

Researchers from ASPE used Department of Treasury tax data and national survey data to determine coverage rates among self-employed adults and small business owners in 2022.

What it Finds

• In 2022, 3.3 million small business owners and self-employed individuals received coverage through the Marketplace.
  • Small business owners and self-employed individuals represent more than a quarter (28 percent) of total Marketplace enrollment for adults aged 21 to 64.
• Enrollment in the Marketplace varied by state: only 20 percent of small business owners and self-employed adults in Rhode Island enrolled in the Marketplace, compared to 41 percent in Hawaii.
• Marketplace enrollment for these groups is correlated to decreases in the uninsured rate: from 2011 to 2022, the uninsured rate for self-employed workers dropped by 9 percent.
• Approximately 82 percent of small business owners and self-employed adults received a premium tax credit in 2022.

Why It Matters

More than half of Americans receive health coverage through employer-sponsored insurance. Small employers are less likely to find affordable group insurance than large employers due to their size and lack of bargaining power. This has led to lower rates of coverage for both groups. The ACA helped address these challenges by creating new coverage options through the Marketplace for small business owners and self-employed individuals, resulting in gains in coverage. These improvements were further bolstered by the enhanced premium tax credit provisions of the American Rescue Plan and the Inflation Reduction Act. As a result, insurance rates have increased, and the coverage gap between wage and salary workers has been reduced. As the new administration considers health policy action, policymakers should remain mindful of the coverage gains that could be lost by repealing the ACA and not extending the enhanced premium tax credits. 

Expected Out-Of-Pocket Costs: Comparing Medicare Advantage With Fee-For-Service Medicare

Benedic Ippolito, Erin Trish, and Boris Vabson. Health Affairs. November 2024. Available here.

Researchers from the American Enterprise Institute, University of Southern California, and Harvard used data from the Centers on Medicare and Medicaid Services (CMS) on projected out-of-pocket (OOP) costs from 2014 to 2020 to compare the generosity of fee-for-service (FFS) Medicare and Medicare Advantage.

What if Finds

• OOP costs for a typical MA enrollee are considerably lower than under FFS Medicare enrollees, and this difference is economically meaningful to beneficiaries.
  • Average monthly OOP costs were approximately 18-24 percent lower for beneficiaries in MA compared to beneficiaries in FFS Medicare. For example, in 2019 MA mean monthly OOP costs were $440, compared with $579 for FFS Medicare.
• Across all categories of health status, OOP costs were lower in MA compared with FFS Medicare without Medigap.
  • OOP costs for beneficiaries in FFS Medicare without Medigap who were in poor health were about $202 and $286 higher per month compared to enrollees in MA-PPOs and MA-HMOs, respectively.
  • For those in poor or fair health, OOP costs were lower in FFS Medicare with Medigap coverage than those without Medigap. 

Why it Matters

These results illustrate a key reason why beneficiaries may find MA more attractive than FFS Medicare–lower OOP spending. Research has found that there are a few known reasons behind lower OOP costs for MA enrollees, including the use of utilization management tools such as prior authorization. These tools are used to reduce costs, which then allows the plans to reallocate part of the savings towards things like reducing premiums or increasing supplemental benefits. However, the Medicare Payment Advisory Committee (MedPAC) estimated payments to MA plans in 2019 to be around 17 percent higher per beneficiary than the equivalent FFS beneficiary. The OOP cost reductions that this study quantified under MA, compared to FFS Medicare, accounted for about 75 percent of this excess spending. Although their results do not endorse higher MA spending, they show that beneficiaries are benefitting through lower OOP costs. The researchers suggest that OOP costs for MA enrollees may rise if MA payments are reduced to match FFS Medicare payment levels.