Hospitals and health systems are hoping for a resolution to the federal government’s debt ceiling standoff. A failure to reach an agreement could have a catastrophic impact on provider payments.
Republicans and Democrats continue to haggle over a deal to raise the $31.4 trillion national debt limit and keep the U.S. from defaulting on its agreements, potentially in early June.
It is unclear which programs the federal government would prioritize if legislators fail to reach a resolution before money runs out, said Alice Burns, associate director for the Program on Medicaid and the Uninsured at KFF.
Depending on what the government decides, providers could face delays or cuts to Medicare and Medicaid reimbursements.
About 70 percent of Medicaid spending comes from the federal government. Without the funding, states would have to decide whether to pick up the difference and whether all providers would be equally affected.
Once a choice is made, providers could feel the impact within days, said Richard Gundling, senior vice president at the Healthcare Financial Management Association.
Losing funds would take a toll on health systems’ balance sheets, forcing providers to fall back on cash reserves or to negotiate other options with lenders, Gundling said. Some providers could cut elective procedures and other services.
Rural facilities would be hardest hit by delayed or stopped payments, given their higher likelihood of financial vulnerability.
“This would be a very big deal,” Gundling said.
Republicans are pushing for tightened work requirements to qualify for federal assistance in debt ceiling negotiations, among other conditions. On Tuesday, House Speaker Kevin McCarthy (R-Calif.) said no deal had yet been struck, following a Monday meeting between McCarthy and President Joe Biden. The Treasury Department has reportedly asked federal agencies whether it can delay upcoming payments.
David Francis, managing director of the BDO Center for Healthcare Excellence and Innovation, said systems should be putting appropriate resources toward their accounts receivable divisions to accelerate claims collections in anticipation of financial challenges, in addition to paying close attention to revenue and expenses. Providers could be forced to pull back on capital plans or cut jobs, he said.
Besides Medicare and Medicaid, government subsidies for Affordable Care Act plans could also dry up, leading to increases in individual premiums. Care provided through Departmetn of Veterans Affairs clinics could also be affected.
Dr. Richard Isaacs, outgoing CEO of Kaiser’s The Permanente Medical Group, said his main concern is what a default would mean for patients’ access to care. Patients facing less coverage for services are more likely to delay seeking care, and providers may become more reluctant to accept individuals using government payer programs.
Due to limited options, patients would increasingly turn to emergency care services, a costly option for both sides, Isaacs said.
“I think, in the short term, you get through it, and then you’ll have a secondary impact because the revenue will need to come from somewhere,” Isaacs said.