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A group of 130 hospitals filed a lawsuit against the Department of Health and Human Services (HHS), challenging a 2023 rule that changes the way certain Medicare payments are calculated (1).
The hospitals argue that the policy is not only flawed but also “arbitrary and capricious,” and say it could put billions of dollars in funding for low-income patient care at risk, specifically for patients with Medicare, Medicaid and those without insurance.
At the center of the dispute is how the government counts patients enrolled in Medicare Advantage plans when determining ‘disproportionate hospital share’ (DSH) payments, which are key sources of funding for hospitals that care for large numbers of vulnerable patients (2).
Hospitals argue that the rule reduces those payments and conflicts with both long-standing policies and previous court rulings. Changes to DSH’s payment structure could increase health care costs and lead to longer wait times due to staffing shortages.
When Moneywise requested a statement, the Department of Health and Human Services declined to comment on the lawsuit.
While the lawsuit aims for a 2023 rule, the fight goes back more than two decades.
In 2004, federal regulators attempted to change the way Medicare Advantage (Part C) patients’ days were counted in DSH payment formulas (3), reducing hospital payments. Courts repeatedly rejected those efforts in a series of rulings, including alina cases (4), in which the government failed to identify “a legal excuse for neglecting its legal notice and comment obligations.”
Despite those decisions, hospitals say the administration has made “repeated attempts” to implement the same policy change under successive administrations, both Republican and Democratic.
The latest rule goes even further by attempting to apply that interpretation retroactively, placing hospitals in an “overpayment” situation that they would have to reimburse. Hospitals argue that this measure is illegal and financially damaging.
The United States District Court for the District of Columbia has already expressed its concerns. In a related case, Montefiore Medical Center v. Kennedy (5), the court concluded that the 2023 rule is clearly retroactive and exceeds the government’s authority.
Read more: I’m almost 50 years old and I have no retirement savings. Is it too late?
For hospitals, the stakes are enormous.
In 2021 alone, Medicaid made a total of $18.9 billion in DSH payments, including $8.1 billion in state funds and $10.8 billion in federal funds (6).
Facilities that rely heavily on these funds, called “safety net hospitals,” could be hardest hit by any reduction in payment (7).
The hospitals involved in the lawsuit argue that they built financial plans around the government’s long-standing approach, saying they “relied on the agency making DSH payments in accordance with (the previous policy).”
They also maintain that the rule is “arbitrary and capricious,” a legal standard that applies when agencies fail to justify major policy changes or adequately account for their impacts (8).
While the case centers on a technical payment formula, the implications could extend much further.
When hospitals face funding challenges, it affects everything from staffing levels to available services. It can also affect patient wait times.
In 2023, the American Hospital Association released a report indicating that overall hospital spending increased 17.5% between 2019 and 2022, but Medicare reimbursement increased only 7.5% during the same period (9).
“When healthcare providers cannot afford the tools and equipment they need to care for patients, they will be forced to make difficult decisions, and the people who will be most affected will be patients,” American Hospital Association President and CEO Rick Pollack wrote in the report.
“We cannot let that happen. Congress and others must act to preserve the care our nation needs and depends on.”
This lawsuit could redirect billions in healthcare funds and test how well hospitals withstand financial strains.
While the outcome of the lawsuit remains uncertain, it highlights a broader reality: When financial pressure on the health system increases, the impact may eventually trickle down to patients in the form of higher costs or reduced access.
That’s why financial preparation is critical, especially when managing healthcare risks.
One of the most effective ways to protect yourself from unexpected medical costs is to have cash on hand just in case.
Hospital visits often cost thousands of dollars, so households without savings are often forced into high-interest debt or withdrawals from retirement funds due to financial hardship. What if you have an emergency? Those costs can run into the tens of thousands (10), especially for emergency room visits.
A high-yield account like a Wealthfront Cash Account can be a great place to grow your uninvested cash, offering competitive interest rates and easy access to your money when you need it.
A Wealthfront Cash account currently offers a base APY of 3.30% through program banks, and new customers can get an additional 0.75% boost during their first three months on up to $150,000 for a total variable APY of 4.05%.
That’s ten times the national savings and deposit rate, according to the FDIC’s March report.
Additionally, Wealthfront is offering new customers who allow direct deposit ($1,000/month minimum) into their Cash account and open and fund a new investment account an additional 0.25% APY boost with no expiration date or balance limit, meaning your APY could be as high as 4.30%.
With no minimum balances or account fees, plus 24/7 withdrawals and free domestic bank transfers, your funds remain accessible at all times. Additionally, you gain access to FDIC insurance eligibility of up to $8 million through program banks.
If you receive a large medical bill, it’s worth taking a closer look before paying.
Hospital bill errors are more common than many people realize, and requesting an itemized statement can help you identify duplicate charges or services you didn’t receive (11).
In some cases, patients can also negotiate their bills or work with services that help reduce costs by reviewing charges and identifying discrepancies.
For many households, the biggest financial risk is not a single hospital visit. Rather, it is the cost of long-term care.
Services like home care, assisted living, or nursing homes can cost thousands of dollars a month, and those expenses are often not fully covered by public or private insurance.
That’s where long-term care insurance can help.
Long-term care insurance offers coverage for the costs of home care, nursing homes, or assisted living facilities.
Without proper planning, paying for long-term care could deplete your retirement fund. In many cases, the burden of paying for care often falls on family members, which could strain their finances.
GoldenCare offers different options depending on your needs, including hybrid life or annuity with long-term care benefits, short-term care, extended care, home health care, assisted living, and traditional long-term care insurance.
Finally, it is important to consider what would happen if the unexpected turns into something more serious. Medical emergencies not only generate immediate costs; They can also have long-term financial consequences for your family.
In a crisis, life insurance can help protect your family’s financial stability. Protect your family from unexpected costs after your death by signing up for term life insurance from Ethos.
Ethos has an “Excellent” rating on Trustpilot and an A+ rating from the Better Business Bureau (BBB). The platform offers simple and affordable coverage for a set period, typically between 10 and 30 years.
As a licensed third-party insurance administrator, Ethos has joined forces with some of the industry’s top insurance companies, including Banner Life, TruStage Financial and Ameritas Life Insurance.
Ethos gives you the flexibility to select coverage amounts ranging from $2,000 to $100,000. Premiums start at just $9.80 per month and are guaranteed for the entire term.
You can get coverage in just 10 minutes online or by phone, with no medical exams or blood tests required.
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Document cloud (1); Paragon Health Institute (2); Federal Register (3); Justía (4), (5); MACPAC (6); National Library of Medicine (7); US Legal (8); American Hospital Association (9); ISOA Insurance (10); Good Bill (11)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
