Medicaid expansion states cut uncompensated care costs for hospitals

In the states that have expanded Medicaid eligibility under the Affordable Care Act, levels of uncompensated care decreased at hospitals within their borders. The same could not be said in the states that have not expanded Medicaid eligibility, according to a study published in the journal Health Affairs.

The study was based on the ubiquitous Medicare Hospital Cost Reports filed between 2011 and 2014. Uncompensated care was toted up as the sum of losses on charity care plus bad debt. Arizona, California, Massachusetts and Minnesota were excluded because they either expanded Medicaid eligibility before the rest of the states did under the ACA, or they expanded Medicaid in a way that was not tied to income. Hospitals were also stratified based on predictors related to how many adults previously uninsured were expected to become eligible for Medicaid under the expansion.

The study concluded that among hospitals with high predictors of newly enrolled patients in Medicaid, their uncompensated care as a percentage of operating costs dropped 1.6 percent. Among those with medium-level predictors, the drop was 1.5 percent. Among those hospitals with low predictors of Medicaid patients, their costs dropped 0.4 percent. By comparison, there was virtually no change among hospitals in non-expansion states.

The study confirms another study suggesting that uncompensated care costs dropped by $7.4 billion in 2014, with much of that savings being reaped by hospitals in expansion states. And a study conducted earlier this year concluded that Medicaid expansion will help safety-net hospitals address their infrastructure and other needs due to the improved cash flow.

“We predict that had non-expansion states expanded Medicaid, uncompensated care costs in those states would be nearly 30 percent lower than they are today,” concluded the study, which was authored by researchers from the Kellogg School of Management at Northwestern University.

- read the Health Affairs article