Uncompensated Care for the Uninsured in 2013: A Detailed Examination

In this section, we present a second estimate of 2013 uncompensated care costs. Given the many assumptions required to generate the estimates, we made two estimates to crosscheck our work. The data we use for the second estimate also enables us to assess how the burden of uncompensated care is divided among health care providers and what are the different sources of funding currently in the health care system to help pay for uncompensated care.

Aggregate Uncompensated Care for Uninsured Using Second Approach

Under the second approach, we estimate that uncompensated care totaled $74.9 billion in 2013 (Table 3). This is about 12 percent lower than the $84.9 billion in uncompensated care we estimate using MEPS data (Table 2).  The lower estimate generated under the second approach likely reflects the lack of data for some known sources of uncompensated care. For example, using the second approach, we do not have information on the free drugs provided by pharmaceutical companies. Similarly, we do not have data on uncompensated care that is recognized as being provided by a wide range of health providers such as pharmacists, dentists, optometrists, therapists, and providers of medical devices and supplies.¹

Table 3: Uncompensated Care Costs  by Place of Service (projected,  2013 ($billions))
Place of Service	Total Costs	% Costs
Total Uncompensated Care	$74.9	100%
Hospital-based	$44.6	59.5%
Community-Based	$30.3	40.5%
Publicly Supported	$19.8	26.4%
Federal	$14.8	19.8%
State/local	$5.0	6.7%
Office-Based Physicians	$10.5	14%
Source: Urban Institute estimates derived from secondary data.

The difference between our two estimates could also reflect the conservative assumptions we made about uncompensated care provided by publicly supported providers such as the Veterans Administration and the Indian Health Service (see below). For uncompensated care supported by these public programs, we assume that that the uninsured use care proportionate to their share of the overall population. In reality, however, the insured have access to other providers and probably only occasionally use publicly-supported providers like the Veterans Administration. We are thus likely underestimating the level of uncompensated care these publicly-supported providers render to the uninsured.

Uncompensated Care Costs by Place of Service (Hospital versus Community)

Of the $74.9 billion in uncompensated care for the uninsured (the estimate from the published data from government sources and provider data), we further estimate that about 60 percent ($44.6 billion) is provided by hospitals, with the balance ($30.3 billion) rendered by community-based providers, including those who receive public funds and office-based physicians (Table 3).  Of the uncompensated care rendered in the community, $14.8 billion was provided by a collection of community-based providers that are at least in part sponsored by the federal government such as the Veterans Administration.  Another $5.0 billion was provided by community-based health care programs and services supported with funds provided by states and local governments. Office-based physicians provided an estimated $10.5 billion in uncompensated care to the uninsured.  Below we describe the various data sources and assumptions we used to arrive at these estimates.

Data and Assumptions Used for Uncompensated Care by Place of Services Analysis

Hospital Uncompensated Care Costs

Uncompensated care is defined by the American Hospital Association (AHA) as care for which no payment is ever received from the patient or an insurer.² The AHA’s estimate of hospitals’ total unreimbursed costs includes both bad debt and charity care but excludes underpayment from Medicaid and Medicare. The AHA defines charity care as unreimbursed services for which hospitals did not expect to receive payment because the patient’s inability to pay had been predetermined; bad debt is unreimbursed services for which hospitals had expected to receive a payment but ultimately did not receive payment.  Despite the differences in how they are defined, in practice hospitals often struggle to draw a distinction between charity care and bad debt.³

The AHA calculates the cost of uncompensated care by multiplying hospitals’ charges for uncompensated care by their cost-to-charge ratios. Using data from its 2011 annual survey, the AHA reported that, nationally, uncompensated care comprised 5.9 percent of total hospital expenses, costing hospitals approximately $41.1 billion.⁴  We inflate this estimate to report that hospitals delivered $44.6 billion in uncompensated care in 2013 (Table 3).

Community-Based Uncompensated Care

We break out community-based uncompensated care into two categories: (1) uncompensated care provided by community-based providers that received financial support from the federal government, states and localities, and (2) uncompensated care provided by office-based physicians.  Overall, we estimated that community-based uncompensated care totaled $30.3 billion in 2013.

Publicly-Supported. Of community-based uncompensated care, $19.8 billion is sponsored with public funds, either through the federal government or states and localities. Federal programs that support such community-based care include the Veterans Health Administration, the Indian Health Service, and HRSA’s Community Health Centers.  State and local governments also support community-based programs that provide health care services to the uninsured.

To develop the estimate of federal funds for community-based uncompensated care, we rely on program and budget data published by six federal programs that support care delivered by clinics and other direct care providers. Specifically, we include spending on six federal programs: the Veterans Administration, the Indian Health Service, the Community Health Centers, the Maternal and Child Health Bureau, and the HIV/AIDS Bureau (Ryan White Care Act).⁵ Many of these providers also render care to insured low-income individuals. To the extent possible, we exclude from our estimates of uncompensated care the share of costs attributable to patients with insurance. We also exclude, to the extent possible, costs associated with long-term care services. In particular, our estimates of uncompensated care spending by federal programs use published program expenditure data for acute care medical services and the share of program costs (or users) identified as being provided to uninsured or self-pay patients. The proportion of uninsured users were either estimated directly from program-specific data or computed from health insurance coverage data collected by the Current Population Survey.

For the estimate of uncompensated care supported by state and local governments, we used information on public assistance programs for which data are available from the Office of the Actuary at the Centers for Medicare and Medicaid Services).⁶  We estimate that state and local governments’ indigent care and public assistance programs also spend a large amount on care for the uninsured—$5.0 billion in services delivered to the uninsured rendered by a variety of providers.

Office-Based Physicians’ Uncompensated Care

Office-based physicians were estimated to provide $10.5 billion in uncompensated care to the uninsured in 2013. To derive this estimate, we figured number of hours of care physicians provide to the uninsured and then multiplied that by the average gross hourly income of physicians.  We used two data sources for this calculation. The first was the 2008 Health Tracking Physician Survey conducted by The Center for Studying Health System Change which reported that in 2008, 59.1 percent of physicians provided some charity care, providing an average of 9.5 hours per month delivering that care.⁷ Using a 2007 estimate of physicians’ average gross earnings per hour of $281.50,⁸ and inflating to 2013 prices, we arrive at an estimate of $9.4 billion in uncompensated care delivered by physicians.⁹

The second data source we use to estimate the level of physicians’ uncompensated care was the 2009 American Medical Association’s Physician Practice Information Survey which found that 53.5 percent of physicians spent an average of three hours per week (or 12 hours per month) delivering uncompensated care.¹⁰ Using the weighted number of physicians from the CSHC survey, this would amount to $11.6 billion in uncompensated care from physicians. Since these estimates were fairly close, we split the difference and estimate that the amount of uncompensated care provided by physicians is $10.5 billion in 2013.

As mentioned, we acknowledge that our estimate of uncompensated care provided in the community is understated because we do not include uncompensated care known to be rendered by a host of other providers, including pharmacists and dentists.