Inequity in Payments to Hospitals for Maternity Care Based on Patient Health Insurance Coverage Promotes Inequity in Maternity Care

In Brief

Payment to hospitals for maternity care is based on patients' insurance coverage. Medicaid pays less than one-half of what commercial insurance pays for the same maternity care. Hospitals with a high percentage of patients covered by Medicaid are disadvantaged financially, which has significant implications for the quality of care that can be provided and physical state of the birthing facilities. Health care services experts and clinical leaders in maternity care should be asking why the value of maternity care for Medicaid patients is allowed to be deemed worth less than one-half of that for patients covered by commercial insurance. Pay equity solutions and policy changes are urgently needed to support the highest quality of care for all maternity patients in the United States.

When a patient gives birth in a hospital, the hospital is reimbursed a predetermined amount for her care during labor, birth, and postpartum, and for the baby's care, based on her health insurance coverage (Table). For example, the government (Medicaid) coverage payment is generally less than one-half of the amount for the birth hospitalization paid from private commercial insurance (^{Truven Health Analytics, 2013; Valencia et al., 2022}). Recent data from 2020 inpatient delivery claims in 38 states from the Health Care Cost Institute and the Transformed Medicaid Statistical Information System from the Centers for Medicare and Medicaid Services (^{Valencia et al., 2022}) found on average the difference between fee-for-service (FFS) Medicaid and employer-sponsored health insurance (ESI) payment to hospitals for all births was $8,732 higher for commercial insurance ($11,084 higher for cesarean births and $7,461 higher for vaginal births). The inequity in payment to hospitals varies by state. Some of largest inequities in payment for birth hospitalization are in states such as California ($15, 007 difference between FFS Medicaid and ESI [$21,140 versus $6,133]), Florida ($14, 174 difference between FFS Medicaid and ESI [$17,340 versus $3,166]) and West Virginia ($13,699 difference between FFS Medicaid and ESI [$17,843 versus $4,144]) as per ^{Valencia et al., (2022)}. Based on these same data (^{Valencia et al., 2022}), states with the smallest inequities in payment for birth hospitalization are New York ($1,817 difference between FFS Medicaid and ESI [$20,092 versus $18,275]), Washington DC ($4,696 difference between FFS Medicaid and ESI [$16,092 versus $11, 396]), and Utah ($5,125 difference between FFS Medicaid and ESI [$13,096 versus $7,944]).

Table: - Overview of Inequities in Payments to Hospitals for Birth Services^a

Payment to Hospital Based on Type of Birth and Insurance Payer	Hospital A Characteristics and Insurance Payment	Hospital B Characteristics and Insurance Payment
	Suburban community hospital 2,000 Births per year 35% Cesarean rate Payer mix 85% Private insurance 12% Medicaid 3% Self-pay	Urban safety net hospital 2,000 Births per year 22% Cesarean rate Payer mix 15% Private insurance 82% Medicaid 3% Self-pay
Average payment to hospitals for vaginal birth $7,000 Private insurance $3,250 Medicaid $1,900 Self-pay	Payment to Hospital A for vaginal births based on payer mix $8,249,100	Payment to Hospital B for vaginal births based on payer mix $5,884,050
Average payment to hospitals for cesarean birth $12,000 Private insurance $ 5,500 Medicaid $ 3,250 Self-pay	Payment to Hospital A for cesarean births based on payer mix $7,669,200	Payment to Hospital B for cesarean births based on payer mix $2,819,100
	Total $15,918,300	Total $8,703,150
Inequity in payment to Hospital B compared to Hospital A per year for same birth volume $7,215,150

^aPayments based on aggregate data from selected health care systems in 2021

If the payer mix of the birthing hospital is such that there is a higher percentage of patients with Medicaid insurance than commercial insurance, the inequity in payment to the hospital for maternity services can be cumulatively quite significant. Hospitals with a high percentage of patients covered by Medicaid are sometimes termed safety net hospitals (^{Agency for Healthcare Research and Quality, 2022; Winkelman & Vickery, 2019}). Patients who give birth at these types of hospitals often have more morbidities and are at higher risk of adverse outcomes than those who give birth at community hospitals (^{Fingar et al., 2018; McKinley et al., 2021}), yet safety net hospitals tend to be consistently reimbursed a lot less for the same or even more intensive maternity care given the overall health of their population, because of their patients' insurance status (^{Valencia et al., 2022}).

Hospitals use insurance payments for salaries and benefits of their work force of health care professionals (the largest percentage of whom are nurses), hospital infrastructure, equipment, supplies, facilities upkeep, new construction, recruitment, advertising, etc. The amount hospitals receive as payment for patient care is a major determinant of their overall budget. Poor insurance reimbursement can result in inadequate nurse staffing, a lean management team, insufficient attention to nursing continuing education and competence validation, difficulty in recruiting nurses due to pay and benefits not commensurate with hospitals in the area, old equipment, outdated facilities, and can negatively affect patient satisfaction, patient outcomes, and hospital reputation.

The inequity in payment for the same care (for example, birth hospitalization) based on patient insurance status creates conditions that promote inequity in care. Poor reimbursement for birth hospitalization may be a factor in challenges to budgetary support for consistent safe nursing staffing as per national standards (^{Association of Women's Health, Obstetric and Neonatal Nurses, 2022; Simpson et al., 2023}). Patients with Medicaid coverage often have less options for types and settings of maternity care (^{National Academies of Sciences, Engineering, and Medicine, 2020}). The unintentional consequences of the payment structure in the health care system in the United States is that it favors patients with commercial insurance and hospitals with a high percentage of patients covered by that insurance compared to patients covered by Medicaid and hospitals with a high percentage of patients covered by Medicaid.

Nurses should advocate for changes in the hospital reimbursement structure for childbirth to promote equity in maternal and neonatal outcomes. The current payment structure is discriminatory. Health care services experts and clinical leaders in maternity care should be asking these questions on a national level and seeking solutions:

• Why is the value of maternity care for Medicaid patients allowed to be deemed worth less than one-half of that for patients covered by commercial insurance?
• Why is this an accepted payment structure?
• What are the implications for patient care and outcomes based on this long-standing hospital payment inequity?
• What can be done to make payment for maternity care services equitable and not based type of insurance coverage?
• Shouldn't maternity care for the childbirth hospitalization be paid the same for all patients and hospitals?
• Why doesn't Medicaid pay hospitals the same for birth hospitalization as the amount paid by commercial insurance?
• Could this payment inequity be a contributor to the extremely unfavorable data on maternal mortality in the United States when compared to peer countries?