Nina Owcharenko has an excellent post at the Health Affairs blog, in which she points out one of the most egregious features of the proposed SCHIP legislation:
The bills would inevitably encourage those with private coverage to drop it in favor of SCHIP. Today, families at all income levels enjoy private coverage. The Congressional Budget Office has warned that this â€ścrowding outâ€? would be extensive.
For not-for-profit community hospitals, the implications of this crowd out effect are dire indeed. If either SCHIP bill is signed into law as currently written, the legislation would amount to a death warrant for many hospitals.
In most states, SCHIP pays Medicaid rates. That means payment for SCHIP patients falls somewhere between 80% and 90% of cost (not chargesâ€”cost). Thus, every time a SCHIP patient is admitted, the hospital incurs a 10% to 20% loss.
Under the â€śnew and improvedâ€? SCHIP, millions of such patients will have been lured away from private insurance plans whose payment rates would have covered costs. The effect of the proposed changes, then, will be to replace marginally profitable patients with unprofitable ones.
The designation â€śnot-for-profitâ€? doesnâ€™t endow a hospital with magical powers. Not-for-profit community hospitals cannot operate in the red and survive. Apparently oblivious to this fact, our masters in Washington are doing their best to send many hospitals into bankruptcy.