We’ve been sounding the alarm for quite some time now:
- Rural hospitals struggled before COVID-19.
- They barely held on during the pandemic.
- And if private health plans continue to slash reimbursements, rural hospitals will likely close after COVID-19, and all associated federal aid, subsides.
According to NC Health News, a new report released by the Center for Healthcare Quality and Payment Reform (CHQPR) reveals that nearly 25% of North Carolina’s 54 rural hospitals may be at risk of closing. That’s 13 hospitals.
One of the most cited possible solutions to the closures is Medicaid expansion. As of 2022, North Carolina is one of 12 states that still hasn’t expanded the program for low-income individuals. Another is eliminating “Medicare sequestration,” or automatic cuts to Medicare payments.
While Medicaid expansion is on the table for North Carolina this year – and would certainly help, if passed, which is unlikely – it’s still not a silver bullet.
Harold Miller, the director of the Center for Healthcare Quality and Payment Reform and a professor of public policy at Carnegie Mellon points out that “neither [policy change] would generate enough new funding to impact a facility’s bottom line.”
That’s because Medicaid pays substantially less than other sources of funding, especially as plans are increasingly operated by private companies.
“The people who are newly getting Medicaid are only a very small proportion of the thing that’s causing the hospital the loss,” Miller said. “That’s not the problem. The problem is [rural hospitals] actually in many cases are losing money on their privately insured patients.” This includes Medicare Advantage plans.
In other words, federal aid expansion is a small attempt to dress the gaping wound left by private health insurers. It’s a single bandage when what rural hospitals need is a tourniquet.
While North Carolina did receive a 2% increase in payments from private insurers from 2019 to 2022, it’s not nearly enough to make up for the losses experienced by the 13 rural hospitals still at risk of closure—especially considering the recent rise in labor costs. According to the Healthcare Financial Management Association, hospital labor costs jumped 8% per patient per day, as compared with 2019.
So, while Medicaid expansion is a good step, it doesn’t rectify the fact that private companies continue to chronically underpay hospitals for the care that they’re obligated to cover.
And until health insurers take ownership of their part of the healthcare puzzle, rural patients across North Carolina will lose access to care within their communities, with serious consequences.