Is it Time to Reform Medicaid and Medicare Supplemental Payments?

Changing how Medicare and Medicaid pay healthcare providers for supplemental services—such as uncompensated hospital care—could help address inequities in the nation’s health system.

The Issue

Data show that in 2020, $82.4 billion in Medicare and Medicaid supplemental payments were made to healthcare providers. Redirecting a portion of these funds could expand coverage and improve outcomes.  

Key Findings

• Of the $82.4 billion in supplemental payments made in 2020, Medicaid accounted for $71.7 billion and Medicare accounted for $10.7 billion. 
• Researchers propose two approaches to repurposing these payments to better address inequities within the health system.
  • The first approach would use a portion of existing supplemental payments to expand health insurance coverage to the uninsured.
  • The second would target existing supplemental payments in a more equitable way, prioritizing hospitals in need across the country.

Conclusion

Supplemental payments are important to healthcare providers, particularly safety net hospitals. Changing the current allocation of supplemental payments would be a significant policy change, but this analysis highlights that a clearer strategy is needed.

About the Urban Institute

The nonprofit Urban Institute is dedicated to elevating the debate on social and economic policy. For nearly five decades, Urban scholars have conducted research and offered evidence-based solutions that improve lives and strengthen communities across a rapidly urbanizing world. Their objective research helps expand opportunities for all, reduce hardship among the most vulnerable, and strengthen the effectiveness of the public sector. Visit the Urban Institute’s Health Policy Center for more information specific to its staff and its recent research.