Public Charge Proposed Rule: Hospital Medicaid Payments at Risk

Health Update

Editor’s Note: A new proposed rule issued by the U.S. Department of Homeland Security (DHS) that scrutinizes certain immigrants’ use of Medicaid coverage could deter enrollment in Medicaid and very likely the Children’s Health Insurance Program (CHIP). As a result, children and adults who are lawfully in the country could become uninsured. The loss of coverage would result in poorer health and health outcomes for affected individuals. It also could lead to reduced Medicaid payments and drive up uncompensated care costs for the nation’s hospitals, causing financial strain, particularly for hospitals in states and communities with large immigrant populations.

In a new analysis—prepared for America’s Essential Hospitals, the Association of American Medical Colleges, the American Hospital Association, the Catholic Health Association of the United States, the Children’s Hospital Association and the Federation of American Hospitals—Manatt Health provides national and state-by-state estimates of the overall Medicaid and CHIP funds and hospital payments at risk if the proposed DHS rule is finalized. Highlights are summarized below. Click here to download a free copy of full report.

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Under long-standing immigration law and guidance, individuals who are likely to become a “public charge”—or likely to rely on the government for financial support—can be denied admission to the United States or, if they are already in the country legally, may be denied the ability to adjust their status and get a green card as a legal permanent resident. DHS’s proposed rule, Inadmissibility on Public Charge Grounds, would make several key changes to how DHS makes public charge determinations and to whom they would apply. These changes include expanding the types of public benefits that would be considered in a public charge determination. If finalized, the rule would direct DHS to consider immigrants’ enrollment in Medicaid when making public charge determinations. (Under current policy, Medicaid is not considered in public charge determinations, other than Medicaid benefits for institutional long-term care services.)

Not all immigrants who are eligible to enroll in Medicaid would be subject to a public charge determination, but this policy change is nonetheless very likely to cause many immigrants to avoid enrolling in Medicaid. It is also likely to deter enrollment in CHIP, which is both a financing source for Medicaid coverage (most CHIP-funded children were covered through Medicaid in 2016) and a stand-alone source of coverage that families often find difficult to distinguish from Medicaid. Based on past experience, these effects would be seen broadly across the immigrant community, including citizens who are part of mixed-status families.

If immigrants and their family members forgo healthcare coverage as a result of the rule due to concerns or confusion about the immigration consequences of program participation—referred to as a “chilling effect”—their health would be adversely affected. In addition, states will lose Medicaid and CHIP funding that they rely on, and hospitals across the country are likely to experience a significant loss of Medicaid payments followed by an increase in uncompensated care for those who do seek care. The consequences of these financial changes will likely have a negative impact on the way hospitals deliver services to their entire communities. Many hospitals operate with thin margins, and if Medicaid funding drops and uncompensated care rises, they are likely to make changes that could impact all patients, not just immigrants targeted by the new rule.

Because the proposed rule does not alter eligibility for Medicaid and CHIP, it is not possible to know exactly how many people would forgo coverage in response to concern about the immigration consequences of using Medicaid. As such, our analysis estimates overall Medicaid and CHIP enrollment, funding and hospital payments that are subject to the chilling effect created by the rule if it is finalized. Key findings include:

  • The potentially affected Medicaid and CHIP population is estimated at 13.2 million as of 2016. This includes 4.4 million noncitizen adults and children who receive Medicaid or CHIP coverage, as well as 8.8 million citizen adults and children with Medicaid or CHIP coverage who are the family members of a noncitizen. This does not count all legal immigrants and family members who are eligible for Medicaid or CHIP, but only those who actually receive coverage.
  • These enrollees accounted for an estimated $68 billion in Medicaid and CHIP healthcare services in 2016, including enrollees who are noncitizens ($26 billion) and those who are citizen family members of a noncitizen ($42 billion). All dollar estimates in this analysis are one-year numbers and represent the combined federal and state spending; the health and financial implications of this rule would extend indefinitely.
  • Because hospitals provide a substantial share of the care delivered to Medicaid and CHIP enrollees, their payments at risk under the public charge proposed rule total an estimated $17 billion in 2016 ($7 billion for noncitizen enrollees and $10 billion for citizen enrollees who have a noncitizen family member).

The healthcare needs of the individuals and families who drop coverage or forgo enrollment in coverage as a result of this immigration rule would not disappear. While they are likely to forgo preventive and routine care, some people would still turn to hospitals for services—particularly for expensive acute care and inpatient procedures as people defer or delay care due to lack of insurance coverage—thereby increasing uncompensated care costs. In the preamble to the proposed rule, DHS itself acknowledges that the rule could decrease the disposable income and increase the poverty of families and children—including U.S. citizen children—and that immigrants forgoing benefits could experience lost productivity, adverse health effects, medical expenses due to delayed healthcare and increased disability claims.

Overall, the public charge proposed rule would have a significant negative impact on hospitals and the communities that rely upon them, particularly in areas with large immigrant populations. As uncompensated care costs rise, the destabilizing impact of the rule could threaten the investments hospitals make in serving their entire communities. Over time, if participation in Medicaid, CHIP, and other health and human service benefits programs declines, children in particular could experience developmental delays and reduced educational attainment, unwinding years of progress that the federal government, states and communities have made in extending Medicaid and CHIP coverage and reducing uninsurance rates among children.