Key Ways the Debt Ceiling Impacts Healthcare Providers, Payments

May 16, 2023 - The US government could run out of money by next month if lawmakers cannot agree on raising or suspending the country’s debt limit. This economic catastrophe could leave the US without funds to pay its bills, and healthcare providers could be in a similar position this summer.

Healthcare isn’t immune to the impact of debt ceiling issues, according to David T. Francis, managing director of The BDO Center for Healthcare Excellence & Innovation.

An obvious impact of the debt ceiling on healthcare is reimbursement. Healthcare providers who accept Medicare, Medicaid, and Children’s Health Insurance Program (CHIP) rely on the government to pay for the treatment of those beneficiaries. Reimbursement from these public payers could run dry if the government cannot pay its debt because of the debt ceiling.

Without these reimbursements, providers who treat more Medicare and Medicaid beneficiaries and those who are already on thin ice financially — including rural hospitals — are in jeopardy. Medicare is a $900.8 billion program and growing, according to the National Health Expenditures (NHE) report. Medicaid spending is also growing just as fast, with the latest data revealing a 9.2 percent increase to $734.0 billion.

The debt ceiling issues will not impact commercial payers as much, Francis explained to RevCycleIntelligence. However, many commercial payers also provide coverage for Medicare and Medicaid beneficiaries, including in the rapidly growing Medicare Advantage space.

“You may see some restrictions around payment and the administrative side of care,” Francis said. “Those are important things right out of the gate.”

However, Francis pointed to a more significant issue with the current debt ceiling problem.

“One of the biggest concerns would be the societal impact and, therefore, reactions of patients,” Francis stated. “When they’re confronted with the idea of insurance loss or higher out-of-pocket healthcare expenses, they may skip out on care.”

The healthcare industry saw a similar reaction during the COVID-19 pandemic. Healthcare organizations saw their patient volumes cut in half at the start of the pandemic in 2020. Those volumes have barely recovered over three years later.

Delaying care can lead to higher acuity patients or, worse, higher mortality rates. Consequently, this behavior can increase medical spending, according to Francis.

Lawmakers are busy negotiating a deal to prevent a breach of the debt ceiling. Moody’s, a global integrated risk assessment firm, estimates just a 10 percent probability of a breach. However, investors are starting to take notice of the fast-approaching X-date, the so-called date when the Treasury will run out of the cash needed to pay the government’s bills on time. That date is likely June 8th, according to the latest debt ceiling analysis from Moody’s.

Healthcare providers are getting anxious the closer X-date gets. This is yet another economic challenge after a long three years of financial turmoil. Francis suggested that healthcare leaders reconsider traditional cost optimization strategies to ease the financial pressures from rising expenses and a tumultuous economic environment.

“I’ll often encounter this willingness to just have staff solve the issues, and the reason why that doesn’t work anymore is the cost,” Francis elaborated.

Healthcare organizations are facing shortages of nearly every type of clinician, with some markets also seeing a shortfall of administrative staff. The traditional methods of cost optimization and reduction cannot work in this type of labor market. Technology that optimizes workflows and increases access to clinicians—even if they are not in the same room as the patient—can help healthcare providers overcome their biggest workforce and cost reduction challenges.

Technology is also key to “being more innovative and creative” in how providers deliver care, which Francis said is essential to long-term financial stability for healthcare organizations. Patients not only have more skin in the game when it comes to medical costs because of high-deductible health plans, but they are also being more selective about where they spend their money because of the economy.

Healthcare organizations should be leveraging technology like self-service platforms on the front end of the healthcare experience to become more patient-centric without having to add more staff. But organizations will need to look within to identify the right technology for their patients and staff; every organization will have different needs.

Francis recommended a new approach in which more people are involved in the decision-making process. Healthcare organizations shouldn’t have a top-down approach anymore, Francis stated. Instead, leaders should gather feedback from staff across the organization to identify workflow improvements that can elevate care delivery. Leaders may also want to leverage the insights from community organizations that work with their patient populations and understand some of their needs.