Erosion of government reimbursement threatens access to health care services. In 2015, more than 1/3 of Iowa’s hospitals reported a flat or negative operating margin ranging from 0 to -22 percent. Iowa’s transition to Medicaid managed care has has led to increased administrative costs, inefficiency and care denials putting hospitals and patient at risk. In 2017, the Iowa Legislature passed approximately $77 million in “cost containment” measures that further reduced Medicaid reimbursement for hospitals. When Medicare/Medicaid fail to cover the cost of care, hospitals absorb the costs as bad debt and charity care. 60 percent of hospital revenue is derived from government-funded health insurance programs. Hospitals have seen a 20 percent increase in charity care in 2017 compared to 2016 indicating significant underpayment.
These losses translate into a cost-shift to the private sector which drives up health insurance costs and negatively impacts hospitals’ ability to react to public health needs and invest in community services.