A look at the financial ramifications hospitals may see from ‘public charge’ changes

• Annual Medicaid hospital payments totaling $17 billion could be at risk as a result of a new rule concerning legal immigrants.
• Hospitals in California, New York, Texas, Florida and New Jersey potentially are most vulnerable.
• One health system plans to educate front-line and clinical staff about how patients will be impacted by the rule.

Hospitals may see Medicaid revenues decline and bad debt increase as the result of a recently finalized rule limiting legal immigrants’ access to public healthcare coverage.

Earlier this month, the Department of Homeland Security (DHS) issued a final rule modifying the definition of services that if used by immigrants would cause them to be deemed a “public charge” and ineligible for permanent residency.

The change added “non-emergency Medicaid” to the list of services that would render immigrants ineligible for residency if they used such services for more than 12 months of any 36-month period. The rule is set to take effect Oct. 15 and applies to immigrants trying to enter the United States or those already living here who are trying to obtain a green card. 

An analysis by Manatt concluded hospitals could experience steep financial impacts if the rule deters enrollment in Medicaid or the Children’s Health Insurance Program (CHIP). The final rule did not include CHIP as a disqualifying service for residency, but Manatt analysts argued that misinterpretations of the rule changes likely would lead legal immigrants to avoid any chance of running afoul of the rule.

The result could be an increase in hospitals’ uncompensated-care costs, especially in states and communities with large immigrant populations, according to the Manatt analysts.

According to the analysis, major impacts include:

• Affecting enrollment in Medicaid and CHIP of 4.4 million noncitizen adults and children
• Affecting enrollment of 8.8 million citizen adults and children who are family members of a noncitizen
• Affecting $26 billion in Medicaid and CHIP services provided to noncitizen enrollees
• Affecting $42 billion in services to citizens who are family members of a noncitizen
• Risking $7 billion in hospital payments for noncitizen enrollees
• Risking $10 billion in hospital payments for citizen enrollees who have a noncitizen family member

Hospitals in certain areas will be hit hardest

The 10 states where hospitals could experience the biggest revenue impact include:

• $5.2 billion at 406 hospitals in California
• $2.7 billion at 199 hospitals in New York
• $1.9 billion at 594 hospitals in Texas
• $785 million at 253 hospitals in Florida
• $608 million at 97 hospitals in New Jersey
• $554 million at 204 hospitals in Illinois
• $457 million at 95 hospitals in Massachusetts
• $383 million at 103 hospitals in Arizona
• $329 million at 100 hospitals in Washington
• $254 million at 60 hospitals in Maryland

“This loss of coverage ultimately transfers the financial burden to hospitals for the needed care provided to this population,” the American Hospital Association (AHA) wrote in comments when the rule was proposed. “For many hospitals serving these vulnerable populations, the added financial stress could be insurmountable.”

Charity care is projected to increase

AHA also noted that the potential loss of Medicaid and CHIP revenue is only part of the financial implications of the new rule. A related increase in uncompensated care would be expected as more newly uninsured patients appear for care they cannot afford.

Rachelle Wenger, director of Public Policy and Community Advocacy for Dignity Health, noted that as people defer or delay their care due to lack of insurance, their medical conditions may worsen and the cost of care may rise when the patients are treated in emergency departments.

Wenger noted in her letter to DHS that the rule will “significantly increase administrative costs, as our hospitals would need to devote considerable time and resources to educating front-line and clinical staff about the various ways patients would be impacted by the rule’s provisions.”

One analysis of the various components of the rule was provided by the Catholic Legal Immigration Network.

Wenger noted the rule “will cause financial strain on our system, compromising our ability to do more in the communities we serve, such as expanding services, clinical innovations and other community benefit programming and investments that address social and environmental determinants of health issues.”

Analysts said hospitals also should track an ongoing legal challenge to the regulation by 13 states.