The Affordable Care Act expanded Medicaid eligibility for millions
of low-income adults.
In a study appearing in JAMA
Fredric Blavin of The Urban Institute, Washington, D.C.,
estimated the association between Medicaid expansion in 2014 and
hospital finances by assessing differences between hospitals in states
that expanded Medicaid and in states that did not expand Medicaid.
‘Medicaid expansion may be associated with increased Medicaid revenue and decreased uncompensated care costs.’
The choice for states to expand Medicaid could
affect the financial health of hospitals by decreasing the proportion of
patient volume and unreimbursed expenses attributable to uninsured
patients while increasing revenue from newly covered patients. However,
whether Medicaid expansion has been associated with improved hospital
profits is uncertain, particularly for hospitals that received generous
support from state or local government for providing uncompensated care.
This study included data from the American Hospital Association
Annual Survey and the Health Care Cost Report Information System from
the U.S. Centers for Medicare & Medicaid Services for nonfederal
general medical or surgical hospitals in fiscal years 2011 through 2014.
The sample included between 1,200 and 1,400 hospitals per fiscal year
in 19 states that expanded Medicaid in early 2014 and between 2,200 and
2,400 hospitals per fiscal year in 25 states that did not expand
Medicaid (with sample size varying depending on the outcome measured).
Expansion of Medicaid was associated with a decline of $2.8 million
in average annual uncompensated care costs per hospital. In addition,
hospitals in states with Medicaid expansion experienced a $3.2 million
increase in average annual Medicaid revenue per hospital, relative to
hospitals in states without Medicaid expansion. Medicaid expansion was
also significantly associated with improved excess margins (a
profitability indicator that includes all other sources of income, not
just those from patient care) (1.1 percentage points), but not improved
"For states still considering Medicaid expansion, these findings
suggest that expansion may be associated with improvements in hospitals'
payer mix and overall financial outlook. However, changes in financial
outcomes for hospitals in any specific state will likely depend on a
host of factors, such as the state's pre-ACA income and coverage
distribution, Medicaid eligibility thresholds, Medicaid reimbursement
levels, and the subsidies hospitals receive for providing uncompensated
care," the author writes.
"Further study is needed to assess longer-term implications of this policy change on hospitals' overall finances."