Based on Projections, The Affordable Healthcare Act (ACA) will Likely Benefit Hospitals

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According to Fitch Ratings, the benefit for hospitals via enrollment in plans offered on the state health insurance exchanges starting Oct. 1 is uncertain, since participant numbers have yet to be disclosed. However, it is anticipated that as enrollment increases, hospitals’ ability to reduce bad debt will also increase and that would clearly be a credit positive.

Questions:
1. What GAAP methods are used to account for bad debt?
2. What is the direct write-off method of accounting for bad debts? Explain why it typically is not considered to be a GAAP method.
3. Explain why the Affordable Healthcare Act has been in the news so much lately.MEDICAID-1-articleLarge
Source:
Neuburger, M. (2013). ACA Exchange Enrollment Could Ease Hospital Bad Debt. Fitch Ratings.com, Oct. 2 (Retrievable online at http://www.fitchratings.com/gws/en/fitchwire/fitchwirearticle/ACA-Exchange-Enrollment?pr_id=803902)