New Issue Brief: Untangling the Hospital Safety Net

Federal aid for the care of indigent patients often goes to the hospitals that need it least

New York, NY – Every year, the U.S. provides billions of dollars in subsidies to hospitals for the funding of healthcare for needy patients. In a new Manhattan Institute issue brief, senior fellow Chris Pope demonstrates that the allocation of federal funding for such care is poorly targeted and proposes a way to focus federal aid while reducing patient costs.

Pope shows that—under the current system for allocating aid for the care of indigent patients—subsidies often go to facilities that need them least, with hospitals in wealthier states like New Hampshire receiving upwards of $2,000 per indigent patient while those in less affluent states such as Wyoming receiving as little as $4 per patient. Pope points out that the current subsidy structure fails to protect indigent patients from high charges, while costing the government substantially more than the total value of free and discounted care provided by hospitals to the uninsured.

To decrease arbitrary distribution and increase hospital accountability, Pope recommends consolidating federal aid for hospitals into grants that are distributed based on how much free and discounted care each facility actually provides to low-income, uninsured patients. In return for accepting these funds, hospitals should accept limits on charges and collections from uninsured patients. Adopting this proposal would ensure that the allocation system is transparent and simple, so that federal aid goes to uncompensated care rather than to inflating hospital costs in the country’s wealthier areas.

Read the full issue brief here.