Medicaid expansion could improve hospital finances in nonexpansion states

Since the Affordable Care Act is still intact—at least for now­—lawmakers in the 19 states that haven’t expanded Medicaid may want to reconsider their decision.

That’s because hospitals located in states that expanded Medicaid saw a decline in their costs of uncompensated care, an increase in Medicaid revenue and improved profit margins, according to a new report prepared by the Urban Institute for the Robert Wood Johnson Foundation. The latest study expands upon the research conducted in 2016 that found similar results after Medicaid expansion under the Affordable Care Act in 2014.

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Researchers used data from the American Hospital Association annual survey and merged it with data from the Centers for Medicare & Medicaid Services Healthcare Cost Report Information System to estimate the effects of the Affordable Care Act on hospital finances in 2015. The study also examined how finances differ between hospitals in states that expanded Medicaid and those that did not.

The study found that in states that expanded Medicaid:

  • Hospitals had $5 million in increased Medicaid revenue and $3.2 million decreased uncompensated care costs, on average per hospital
  • Hospitals improved average operating margins by 2.5 percentage points
  • Small hospitals, for-profit and non-federal-government-operated hospitals and those in nonmetropolitan areas had the greatest gains in profit margins

The American Health Care Act, which was pulled prior to a House vote, would have repealed the state option to expand Medicaid under the ACA. But now that President Barack Obama’s signature legislation remains the law of the land for now, researchers say the findings may be a reason for states that didn’t expand Medicaid to reconsider the decision.

“For states still considering the Medicaid expansion, these findings suggest that expansion likely would improve hospitals’ payer mix and overall financial outlook, particularly those in nonmetro areas,” the study found. However, researchers noted that changes in financial outcomes will depend on other factors, such as existing state or regional coverage gains under the ACA, state Medicaid eligibility before the 2014 expansion, Medicaid reimbursement levels, and subsidies hospitals would receive for providing uncompensated care to people who lose coverage.

The fight for expansion continues in Virginia and Maine, NPR reports. But the debate ended in Kansas on Monday, The New York Times reported, when the House fell three votes shy of the 84 it needed to override Gov. Sam Brownback’s veto of a bill that would have expanded the program to thousands of low-income people in the Sunflower State. That decision could have a devastating impact on Sumner Regional Medical Center, CEO Les Dean told

“For us, it’s over three-quarters of a million dollars a year and we are all in a fight for our own survival at this point,” Dean told the publication.