Public payers such as Medicaid more frequently underpaid children’s hospitals when compared to private payers, according to a study published in JAMA Pediatrics.
The proportion of public aid patients is higher at children’s hospitals when compared to other hospitals, so ensuring state Medicaid programs are well-funded can reduce the burden of underpayment on children’s hospitals, according to Denise Goodman, MD, professor of Pediatrics in the Division of Critical Care and co-author of the study.
“If there is consistent and systematic underpayment to children’s hospitals, it puts their ability to fulfill their missions at peril, including their ability to fulfill their missions to care for children, promote education of the next generation of pediatricians and contribute to innovative new therapies,” Goodman said.
The retrospective study analyzed more than 200,000 admissions for children at 15 children’s hospitals in the United States. Thirty-five percent of admissions resulted in underpayment and this was more prevalent with public versus private payers: 51 percent for public payers versus 18 percent for private payers.
A longer length of stay was associated with a higher likelihood of underpayment, while admissions for children with complex conditions were less likely to be underpaid, regardless of payer.
These results are a reflection of broader systemic issues with Medicaid payment, according to Goodman. While Medicare regulations for over-65 care are set at a national level, Medicaid is administered on a state-by-state basis, and even within a state, managed care organizations may have different approaches.
“Payment rates to hospitals reflect both managed care plan rules and state law allocations,” Goodman said. “This makes them relatively less responsive to changes in need — such as what happened during COVID-19 when unemployment moved patients from employer-provided to public aid coverage — and also subject to competing budget priorities.”
This structure incentivizes providers to prioritize care to children with private insurance, one cause of healthcare inequity, said Rishi Agrawal, ’01 MD, ’01 MPH, ’04 GME, associate professor of Pediatrics in the Division of Hospital-Based Medicine and co-author of the study.
“Children of color and those with disabilities are disproportionately in Medicaid, and underpayment by Medicaid makes it harder for these groups to access needed care, contributing to systemic racism and ableism in healthcare delivery,” Agrawal said.
One solution to alleviate Medicaid underpayment is establishing payment parity between Medicaid and Medicare. The federal government typically pays 60 percent of total Medicaid costs and states pay the remainder. While the Affordable Care Act funded payment parity for two years, it needs to be reinstated permanently, according to Agrawal.
