Author: Oscar Gonzalez, Vice President, Healthcare Banking
In the November 2018 election, Nebraska residents voted to expand the state’s Medicaid program, adding Nebraska to the list of 39 states that have expanded Medicaid. On August 1 of this year, Nebraskans became able to enroll in the program, with coverage beginning two months later on October 1, 2020.
The expansion of Medicaid is certainly on the radar of the state’s healthcare providers. At a time when health coverage is critical, an estimated 90,000 residents will now qualify for the program. The expansion means that Nebraskans aged 19-64 who earn up to 138% of the federal poverty level (around $17,000 a year per person) will be eligible for coverage.
With the large number of Nebraska residents who will now qualify for coverage, providers should expect to see an increase in volume. In just the first few days of enrollment, more than 1,100 Nebraskans applied for health coverage.
As providers prepare for an increase in Medicaid patients, it’s important to consider the economic state we are currently in. As of July, 2020, the state’s unemployment rate was 4.8%. Although this is lower than the national average of 10.2%, it’s a noticeable increase, considering the state’s unemployment rate was 3.1% in March. This means that there are likely more individuals without an income or earning a lower income who are in need of health coverage.
On a positive note, expanded Medicaid may also result in fewer write offs for health systems. Providers always have a portion of receivables that go unpaid due to a lack of health coverage and patient income, which is often referred to as bad debt. A study of 100 hospitals by Sage Growth Partners found that about 36% of responding health systems have more than $10 million in bad debt. Only half of these respondents indicated that their hospitals could recover more than 10% of what they’re owed. These statistics aren’t surprising when you consider that less than a quarter of Americans could cover an unexpected medical bill of $2,000 or more.
The hope is that an expanded Medicaid program will help these low-income patients and the providers who treat them. Even though Medicaid doesn’t reimburse as well as private payers, it’s a win-win for patients and providers because there is some type of coverage.
As mentioned previously, 39 states have now expanded Medicaid, which means Nebraska can learn from the experience of many other states as it rolls out its program. According to a KFF report on the Effects of Medicaid Expansion under the Affordable Care Act, studies generally find positive effects of Medicaid expansion when it comes to access and utilization of care, insurance coverage and payer mix.
Research has also shown that Medicaid expansion has had a positive impact on hospitals, resulting in reductions in uncompensated care and improved operating margins—especially for small hospitals. Patients also see financial benefits from expanded coverage. One Health Affairs review cited a study that indicated Medicaid expansion was linked to lower loan debt of patients in California, including less use of payday loans.
Over the past few months, healthcare providers have already been preparing for an influx in patients due to COVID-19 but with expanded Medicaid, there may be an additional increase in volume. Now more than ever, providers need to ensure they’re operating efficiently and have the working capital they need to continue providing the best possible care.
To help address potential liquidity and efficiency issues, now may be a good time to implement an AP automation solution. AP automation makes it easy for providers to make payments from any location with minimal intervention. Some of these payment solutions, like FNBO’s First Payment Exchange, combine non-card payments with a revolving credit facility, which allows for the same type of cash float that providers benefit from with credit card payments, easing liquidity strains. This allows suppliers to be paid within the negotiated terms but gives the provider an extended period of time before having to part with the cash—which may be especially helpful for health systems experiencing increased patient volume.
Contact FNBO’s healthcare banking team to learn how we can help. We offer financing for working capital, new construction, renovations, equipment acquisitions and patient financing, as well as revenue cycle management, AP solutions and capital markets.
About the Author
Oscar is the Vice President of Healthcare Banking at FNBO, where he joined in 2007 and has held numerous commercial banking positions. He grew up in Mexico City where he attained his Bachelor's in Economics and interned at the Central Bank. He then moved to Spain and obtained his Master's in Banking and Finance, and finally moved to the United States and received his MBA with a concentration in corporate finance.