Evers's Healthcare Plan: More Medicaid, Higher Costs

The Governor's Healthcare Plan

Governor Evers wants to increase the hospital assessment fee in order to increase aid to hospitals by billions of dollars, a classic bait-and-switch. But the healthcare system in Wisconsin is already dealing with many issues, including added financial stress made worse by state policy makers.

In his latest budget, Evers would increase payments to hospitals by $3.3 billion over the course of the biennium to pay for increased reimbursement rates incurred by treating Medicaid patients. This would also support his goal of expanding Medicaid eligibility. This plan reflects a brutal economic reality. Wisconsin can’t even support its current Medicaid population, much less absorb this planned expansion, without major cost-shifting to other health care consumers.

Wisconsin hospitals already try to offset their expenses from treating Medicaid patients by raising prices on everyone else which creates a Hidden Health Tax. Here’s how it works...

How Medicaid Works

In Wisconsin, 65% of the costs from Medicaid (known as BadgerCare Plus) are paid for by the state, but the remaining 35% must be shifted elsewhere. This means businesses, families, and other healthcare consumers are on the hook to cover these “unpaid costs.”

According to the Wisconsin Hospital Association (WHA), consumers’ responsibility to cover BadgerCare’s “unpaid costs” increases healthcare costs by $945 per year for a family of 3, and $1,250 annually for a family of 4. Those costs add up. Statewide, there were $1.6 billion in unpaid BadgerCare costs in 2017—costs that hospitals must then shift onto other patients.

However, when hospitals can’t shift their Medicaid costs onto other patients, they’re at increased risk of going out of business. For example, two major hospitals in the Chippewa Valley closed last March, in addition to 19 smaller clinics. Those two hospitals both received about two-thirds of their patients’ revenue from Medicare and Medicaid. The president and CEO of the WHA, Eric Borgerding, also noted that the two hospitals that closed struggled with higher costs and inadequate reimbursements—which, according to the Chief Healthcare Executive, “are exacerbated in a state with an aging populace where patients need more services.”

Specifically, in 2022, Sacred Heart Hospital in Eau Claire only received about $35.4 million in reimbursements for some $54.4 million in care it provided to Medicaid patients. Meanwhile, St. Joseph’s Hospital only collected $11.2 million from Medicaid and had to find a way to cover $6 million in Medicaid costs that it too was not reimbursed for. These unreimbursed costs certainly contributed to the “prolonged operational and financial stress” HSHS attributed to their closures.

More Medicaid, Higher Costs

Evers’s plan to raise the hospital assessment fee might make it easier for hospitals to accept more Medicaid patients, but it will also increase healthcare costs for everyone else and place other hospitals at risk of closing. And the governor’s plan remains vague. His proposal is clear about providing hospitals with an additional $3.3 billion over the biennium, but his budget states this will be partially “funded by an increase to the hospital assessment.” According to the governor’s budget, Evers is proposing a levy of $971 million in new assessment fees for each fiscal year.

But crucially, the governor has also proposed that this increase not apply to acute care or rehabilitation hospitals. Since these hospitals paid $414.5 million in assessments in FY 2023, the increase would have to be covered entirely by Critical Access Hospitals. This puts Critical Access Hospitals in jeopardy as they collectively paid only $5.6 million in assessments in FY 2023. In other words, if Governor Evers had his way, Critical Access Hospitals’ annual assessment payments would need to increase by $971 million to cover all the new fees. And since there are currently only 58 Critical Access Hospitals in the state paying an average of $96,000 in assessment fees per year, the average hospital would now need to pay $16.8 million!

Lastly, if we use current Medicaid reimbursement rates as a benchmark to estimate how Evers’s proposal would increase healthcare costs, $3.3 billion in additional payments to hospitals would increase the number of Medicaid recipients but still only cover 65% of Medicaid expense—meaning hospitals would have to shift another $1.8 billion of costs on consumers.

The added financial stress placed on hospitals by higher assessments and Medicaid expansion makes medical facilities prone to closing or decreasing services to consumers outside the Medicaid system. If Evers’s goal is to increase access to healthcare and improve health outcomes for the bulk of Wisconsinites, his policy proposal is the perfect way to accomplish neither.