Sources of Payment for Uncompensated Care for the Uninsured

Uncompensated care costs for the nation’s uninsured averaged $42.4 billion per year in the 2015-2017time period. While substantial, these costs significantly declined following implementation of the Affordable Care Act’s coverage expansion, down from $62.8 billion per year in2011-2013. Although health care providers incur substantial cost in caring for the uninsured, the bulk of their costs are compensated through a web of complicated funding streams, financed largely with public funds from the federal government, states and localities. This brief estimates the level of public funding that was paid to help offset providers’ uncompensated care costs for the uninsured in 2017. To conduct the analysis, we rely on several secondary data sources including government budget appropriations and expenditure data for major public programs that provided funds to cover the cost of care for the uninsured, as well as analyses of secondary data sources completed by others. Key findings include:

• Nationally, at least $33.6 billion in public funds were paid to providers to help defray providers’ uncompensated care costs associated with caring for the uninsured in 2017.
• The federal government accounted for an estimated $21.7 billion, or nearly two-thirds of the public funding sources examined, most of which was through the Veterans Health Administration or Medicaid; providing $11.9 billion, states and localities made up the balance, primarily through indigent care and public assistance programs.
• Comparing the level of public funding to our estimate of total uncompensated care costs for the uninsured ($42.4 billion per year in 2015-2017), we calculate that in the aggregate nearly 80.0 percent of providers’ uncompensated care costs were offset by government payments designed to cover these costs.

Given the rise in the number of the uninsured since 2017, provider uncompensated care costs associated with caring for the uninsured have likely increased. Between 2017 and 2019, the number of uninsured grew by an estimated1.5 million. In addition, with the economic toll brought on by the pandemic, the nation’suninsured ratemay havecontinued to climb in 2020. With the increase in uninsurance since 2017, provider uncompensated care also likely increased. As policymakers undertake efforts to expand coverage and assess the financial impact of the pandemic, understanding uncompensated care costs and the adequacy of public funding to help defray these costs can help direct policies targeted to the uninsured. With substantial public funding of uncompensated care, government costs associated with increases in coverage could be offset in part by savings in other parts of the public ledger.