Study: Hospitals in Medicaid expansion states could have better chance of weathering COVID-19 crisis

Hospitals in states that expanded Medicaid have a greater chance of weathering the financial crisis caused by COVID-19 as they have increased Medicaid revenue, a new study finds.

The study, published Tuesday in the journal Health Affairs, looked at the financial impact of the expansion on hospitals in 2016 and 2017 and the differences between facilities that resided in states which did and did not expand Medicaid.

“Hospitals in expansion states continued to experience decreased uncompensated care costs and increased Medicaid revenue and financial margins,” the study said. “The magnitude of these impacts varied by hospital type.”

The study compared changes in financial outcomes for hospitals in 25 states that expanded Medicaid in early 2014 and 19 states that did not. It also looked at outcomes based on the type of hospital and compared them to 2011 and 2013 before expansion came online. 

“Overall, hospitals in expansion states were more likely to be nonprofit, be larger, have a teaching affiliation and be located in metropolitan areas compared with hospitals in non-expansion states,” the study said.

Researchers found that in 2017 the expansion was associated with a major $6.4 million decline in mean uncompensated care costs as a percentage of total expenses compared to 2011-2013, before expansion went into effect.

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The expansion also increased Medicaid revenue for expansion states.

“Relative to the 2011-2013 pre period, expansion in 2017 was associated with an $8.6 million annual increase in mean Medicaid revenue and a 3.6-percentage point increase in Medicaid revenue as a percentage of total revenue,” the study said.

There was a variation on the financial impact on the hospitals based on the type of facility.

For instance, hospitals with less than 100 beds got an increase of $2 million in Medicaid revenue in 2017 compared to the pre-expansion period. Larger hospitals with more than 300 beds got a $27 million increase during the same time frame.

Researchers said that with the financial crisis caused by COVID-19 continuing, non-expansion states need to consider the potential financial benefit for their hospitals if they do adopt it.

“Both Medicaid coverage and the viability of safety-net hospitals that treat the most vulnerable and rely heavily on Medicaid for payment are essential for addressing the crisis among those who are most at risk,” the study said.

Medicaid enrollment could also increase as the pandemic has created massive job losses and some people lose their employer-sponsored insurance.

An analysis from the Kaiser Family Foundation found that total enrollment in Medicaid and the Children’s Health Insurance Program increased by 7.4% from February to August last year.

The study relied on data from the American Health Association’s Annual Survey database and the Centers for Medicare & Medicaid Services’ Healthcare Cost Report.

As of Nov. 2, 39 states and the District of Columbia have expanded Medicaid under the Affordable Care Act and 12 have not, according to a database maintained by the Kaiser Family Foundation.