The Consequences Of Default For Health Care Providers

Kaiser Health News looks into the consequences of a possible default for the health care sector and finds that while providers wouldn’t feel an impact over several days, given their dependence on Medicare and Medicaid payments, a prolonged crisis could be “apocalyptic”:

But the worst case scenario here would be more apocalyptic, he says. That’s because health care providers would lose revenues from Medicare and Medicaid at the same time. Plus, a debt default could also unnerve the capital markets, making it difficult or impossible for providers to borrow money to stay afloat. And states are having so many financial problems that they’re not in a position to fill in the gaps.

Matt Salo, executive director of the National Association of Medicaid Directors, says that in the “worst-case scenario, Aug. 2 comes around with no deal, Medicaid is not going to shut down.” But if the bond markets melt down, states could face higher interest rates on money they’ve already borrowed from investors, making it even harder for states to pay their share of Medicaid, which is generally about half, he says. The federal government on average pays about 56 percent of Medicaid costs.

The administration will also be in a tough spot, having to figure out “which checks to issue and when after Aug. 2, since it will be missing about 40 percent of the cash required to pay its bills.” Experts expect for that order to look something like this: 1) pay interest on the debt, 2) send Social Security checks. Medicare payments could be held back, since a short delay is not expected to “jeopardize access as long as the crisis did not drag out too long and they were paid after the crisis ended.”