April 24 Non-profit hospitals will struggle with
higher costs if the U.S. Supreme Court overturns a key part of
the healthcare reform law that requires individuals to buy
insurance, Moody's Investors Service said on Tuesday.
The "individual mandate," which stipulates that individuals
who do not buy insurance will face a fine, has become the focus
for legal attacks on the healthcare law.
It "would result in a significant reduction in uncompensated
care delivered by hospitals" and reduce "utilization of
expensive emergency room services," the rating agency said in a
The U.S. Supreme Court heard arguments last month over the
individual mandate, and it will soon decide whether to uphold
the entire healthcare law, allow the law to stand stripped of
the mandate, or strike down the whole law.
"If the Supreme Court overturns the individual mandate, the
private health insurance market would likely weaken under the
unbalanced weight of strict provisions to cover all those who
seek insurance without the counterbalancing benefit of a new,
largely healthy, population segment that would be provided under
the mandate," Moody's said.
"This scenario could become untenable for many insurers and
hospitals, as costs would rise but revenues would not," it
There are also challenges to non-profit hospitals in the
law, specifically reductions in reimbursement rates for
Medicare, the public health insurance program for the elderly,
and cuts to funds for hospitals that serve a disproportionate
share of Medicaid recipients, the healthcare program for the
poor, Moody's said.
"Removing the mandate would make the negative features of
reform loom much larger," it added.
Moody's said the federal government could turn to a voucher
system in which individuals would receive public aid in
purchasing health insurance, but the results for non-profits
hospitals "would be more complex and hard to foresee."
Medicare, meanwhile, faces its own uncertain future. An
annual report from its trustees released on Monday said that in
12 years it could become insolvent.
(Reporting By Lisa Lambert; Editing by Leslie Adler)