Health Care

It’s Time to Redesign Government-Hospital Coronavirus Funding

Medics bring a patient who has tested positive for the coronavirus to the ambulance in Chelsea, Mass., April 10, 2020. (Brian Snyder/Reuters)
Don’t rush to give hospitals more money, but if there is another bailout, require them to treat and charge patients fairly.

To prepare for a coronavirus surge, initial public-health guidance advised hospitals and medical facilities to shut down for non-emergency care. The motivation was largely to preserve medical resources for those infected with the coronavirus, although another benefit has been to reduce the virus’s contagion to other patients.

Acting on federal advice, 31 states and the District of Columbia restricted non-emergency care at hospitals and surgery centers, including cancer treatments and other potentially life-saving services. Others voluntarily shut down elective services. On the positive side, the chain reaction will accelerate adoption of telehealth, which was vastly underutilized despite its promise to streamline care, reduce wait times, keep sick people out of waiting rooms, and address geographic disparities in access to care. On the negative side, hospital capacity has idled, devastated provider revenue, and led to widespread furloughs.

Hospitals appealed to Congress for relief, and Congress delivered, with a $100 billion bailout fund and an increase in Medicare payments for coronavirus treatments. The fund is to compensate for coronavirus costs and to help hospitals whose revenue has plummeted.

But that money isn’t free. Congress provides it through additional borrowing. For the first time in our nation’s history, the U.S. is on track to spend more than twice the amount it collects in revenues, even before Congress passes a fourth coronavirus spending bill. The Federal Reserve is monetizing much of this new debt, bloating its balance sheet with an unprecedented $3.6 trillion in Treasury issuances.

Congress gave enormous flexibility to the secretary of health and human services (HHS) to distribute the funds. The first $30 billion is out the door and was based on past Medicare payments. The HHS secretary also decided to compensate hospitals for treating the uninsured, and this funding will likely be several billion dollars. Although two-thirds of the initial bailout funding still needs to be distributed, hospitals and some of their congressional allies are calling for another $75 billion in taxpayer assistance.

Yet before exacerbating the profound fiscal and monetary distortions by spending more on hospitals, policymakers need to confront three questions, particularly since the anticipated coronavirus surge failed to materialize in most of the country.

Can some hospitals and other medical facilities, such as independent surgery centers, open their doors for non-emergency services now, or relatively soon? Are further government bailouts needed, since a portion of delayed care will eventually be scheduled and HHS has created a significant loan program for medical professionals? Should hospitals be required to institute any reforms if Congress allocates additional bailout funds?

It’s important to consider that the epidemic has been severe in only a few regions of the country. Nearly half of all cases and deaths are from New York State, including more than a third of the total in New York City. Other parts of the country hit hard are the Northeast Corridor, from Boston to Philadelphia, along with New Orleans and Detroit. While reopening the health-care system to non-emergency care may be imprudent in these places because of greater infection risk, the benefits of reopening health-care systems, with necessary precautions, probably exceed the corresponding costs in much of the rest of the country.

Policymakers must have realistic estimates of the amount of revenue that will return to hospitals and medical facilities when reopening occurs. Significantly, loan programs, such as the HHS program underway, are designed to get providers through a temporary revenue drought and are far more appropriate than a bailout. And some hospitals have greater needs than others.

With all the spending Congress already has approved, additional money for hospitals at this time is not responsible. However, if Congress hastily offers a second bailout, it’s vital that certain conditions be placed to protect consumers. These could be modeled on HHS’s wise decision to condition receipt of the initial bailout funds on hospitals’ agreement not to charge patients more for coronavirus treatments than their insurance company agrees to pay, preventing a practice called balance billing.

As a condition of another pot of taxpayer money, Congress should codify an HHS rule that requires hospitals to post prices by January 1, 2021. Right now, hospitals are suing to block this rule, claiming that HHS lacked the authority to implement it. Congress should codify it to protect consumers. Tens of millions of workers have lost jobs, and money for families is extremely tight. A more transparent system will enable better health decisions and will also help employers structure benefits as they try to keep their business afloat.

Hospitals taking bailout funds should also be prohibited from ruining patients’ credit and sending them into collections if the patient has negotiated a payment plan or if the medical debt is simply from a balance bill. Taxpayers and consumers are owed at least this much for a further bailout.

Brian Blase is a senior fellow at the Galen Institute and the Foundation for Government Accountability (FGA). Josh Archambault is a senior fellow at the FGA. Doug Badger is a senior fellow at the Galen Institute.

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