States that opt out of Medicaid expansion but have large numbers of uninsured residents will be at high risk of budget shortfalls as the federal government reduces payments to disproportionate share hospitals (DSH) under the Affordable Care Act, Moody's warned in a report issued Thursday.
The report notes that states opting out of Medicaid expansion likely will face large uninsured populations at the same time DSH payments decline, Moody's Investor Service said in an announcement.
Seven of the 14 states where governors oppose Medicaid expansion already have above-average levels of uninsured adults that would qualify for Medicaid under the expansion, Moody's said.
"States that opt out of Medicaid expansion will have to choose whether to compensate for the shortfalls with their own funds or leave hospitals to absorb the costs, which will increase rating pressure on the hospitals," Nicole Johnson, a Moody's senior vice president, said in a statement. "States that choose to fund uncompensated care costs themselves could face budgetary strain."
Hospital bond ratings also could be at risk unless increased costs are offset by higher Medicaid and private insurance rates, a drop in uninsured patients or additional state funding, Moody's said.
A recent article in the New England Journal of Medicine raised similar issues to the Moody's report, noting that regardless of Medicaid expansion, the Affordable Care Act will cut Medicaid DSH payments by $18.1 billion between 2014 and 2020.
Additionally, under a new Medicare DSH formula, hospitals in states that cut their uninsured rate in half could see Medicare DSH payments drop 38 percent, the NEJM article noted. The largest cuts to DSH funding are likely to hit hospitals in Texas, Louisiana and Florida.
To learn more:
- read the Moody's announcement