why do state governments pay hospitals?



I read this article in the NYTimes, and I don’t understand why hospitals are paid by states in the first place. Doesn’t Medicare pay individuals directly who then pay the hospital? Why the government middleman?


In: Other

Reimbursement to hospitals from Medicaid comes directly from the government to the hospitals.

>Doesn’t Medicare pay individuals directly who then pay the hospital? Why the government middleman?

No, that is not how insurance works for anyone. Insurance is paid directly to the billing entity. Imagine the quantity of fraud and misappropriation if Medicare or Aetna was sending around checks to people for $50k and telling them “make sure you pay the hospital with this money”.

Generally, when signing into a hospital or when obtaining medical services, one signs a form that gives the hospital or agency charging for the service the right to bill insurance directly and to have the payment from insurance directly given from the insurance company to the hospital. One can choose in some circumstances to have the payout from insurance sent to the insured individual, who can then go to the hospital and pay the hospital themselves. I don’t know anyone who does that, mostly because that’s a lot of back and forth, and also because I would assume that insurance companies wouldn’t want to hand money to an individual then expect them to pay the hospital themselves (imagine someone taking that payout and buying food or medications or clothes or anything else instead of using it for what it was meant for). Sometimes the forms signed when obtaining services are a contract saying that the individual will hand over any such payment to the hospital, but at the end of the day, I don’t think anything can make someone do or pay anything. If the government didn’t pay the hospital directly, the government would run the risk of handing money to an individual. That individual could take the money and run, and not pay the hospital, and the government would lose even more money (the cost of the service twice, essentially- the original cost of services spent to provide the service, then the cost of the service again that was handed to the individual that took the payment and used the funds for their own spending). I think it’s a form of risk reduction for the government’s payment of services. The government can control where the money goes if they pay the hospital directly.

I think you have a couple of misconceptions.

Medicare is the FEDERAL government program for seniors and people with some disabilities. A federal government contractor directly pays hospitals for care provided to Medicare beneficiaries.

Medicaid is a state/federal program for low income people, especially children. The state directly pays hospitals, then the federal government reimburses the state for ~60% of the cost (depending on how poor the state is). This is the program they’re talking about in this article.

Neither program, nor commercial insurance, directly pays patients except in rare circumstances.

Health insurance does not pay individuals, it pays directly to hospitals and doctors. Hospital then bills you for whatever insurance did not cover.

Sometimes state government is the insurer for Medicaid members andpays hospital directly. Sometimes state pays insurance premiums to commercial insurance companies (Aetna, Highmark, etc.), and those insurance companies pay the hospital. In either case, the state controls the prices that hospitals receive, and that translates into how much money the state has to budget for Medicaid.

And Medicare is not Medicaid. Medicare is run by federal government, not states.