Medicaid Reimbursement

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April 23, 2024
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Medicaid Reimbursement

In the U.S., Medicaid and Medicare account for 37% of national healthcare expenditure (Davis & Kan, 2019) compared to private healthcare insurance at 34%. Medicare spending rose by 6.7% in 2019 while Medicaid spending rose by 2.9% in the same year (NHE, 2019). The two health programs have been in existence for decades due to the burden they take away from the cost of hospital care that may prove an economic hardship for patients and their families. Medicaid and Medicare act as a safety measure for healthcare institutions by reimbursing facilities for the cost of hospitalizations that the patients do not pay for themselves. Often, this reimbursement does not cover the hospital’s care costs, creating a problem for hospitals whose mission is high-quality patient care.
Additionally, patients, especially children, relying on Medicaid often present with numerous socioeconomic hardships that complicate their healthcare needs. For example, patients with food insecurity, unstable housing and limited contact to primary care services may experience more serious conditions in comparison to those with ready access to care and more resources. Their hospital stays are also meaningfully longer and their conditions more likely to be categorized as severe (Michel et al., 2019). These challenges have brought about the discussion of how to cater to the needs of patients who may require hospitalization. This is even more serious when we consider that most reimbursement programs offer hospitals with one time payments which are disconnected from the magnitude of patients being attended to or the individual cost of care per patient. It is therefore necessary to develop policies that address the issue on an individual level.
One option involves raising Medicaid reimbursement to hospitals specifically for hospitalizations. This approach would act as an adjustment for the reimbursement levels for the amount of disadvantaged youths a hospital cares for given that eligibility for children is more often than not dependent on household income. A second solution would involve applying a payment system adjusted per patient for location defined social risk. This would counter for the challenges faced by hospitals in low-resource areas in addressing the social needs of a patient. The third solution would be the applying the same per-patient adjusted payment approach but connected to patient outcome quality. Under this solution, healthcare organizations would be incentivized to work towards improving in quality against their previous benchmarks. Another option to address the low reimbursement of hospitals taking care of children with social disadvantages is to recommend hospitals to serve as anchor institutions in the community. Hospitals under this policy would pledge to the role of major employer and buyer of services and goods and also address the issues such as systemic poverty and employment in the communities they serve. By doing so they are invested in the community’s overall health status.
Understanding the aspects of Medicaid reimbursement to healthcare institutions and the amount paid to hospitals by Medicaid is crucial in view of the various policy adjustments happening. The Medicare Report shows decline in uncompensated care on a national level. Some facilities will adapt better to policy changes than others. Since Medicaid reimbursement often does not cater for the hospital’s care delivery expenses, it is up to providers to come up with solutions that adequately address the challenges arising and continue providing high-quality care.




Davis, M., & Kan, K. (2019). Adjusting Hospital Reimbursement to Account for Social Influences on Health. JAMA Network Open2(10), e1913630.

Michel, M., Alberti, C., Carel, J., & Chevreul, K. (2019). Association of Pediatric Inpatient Socioeconomic Status With Hospital Efficiency and Financial Balance. JAMA Network Open2(10), e1913656.

NHE. (2019). NHE Fact Sheet | CMS. Retrieved 1 September 2021, from