Hospitals in Medicaid expansion states have saved an average of $6.4 million on uncompensated care since the policies took effect, with safety-net hospitals pocketing even more savings, according to a new study published in Health Affairs.
Researchers from the Urban Institute on Tuesday reported that uncompensated care comprised 6% of total expenses for hospitals located in non-expansion states in 2017, double the amount for those located in states that had expanded the program.
They compared data from hospitals in the 25 states that expanded Medicaid in 2014 with those in the 19 states that have not expanded the program. They merged data from the American Hospital Association’s annual survey and the CMS’ Healthcare Provider Cost Reporting Information System to look at changes in hospital finances from 2011 to 2017, with data from 2011 to 2013 averaged to indicate what hospitals’ uncompensated care, Medicaid revenue and profits looked like before Medicaid expansion took effect.
They found that Medicaid expansion has been good for hospitals’ financial health.
In addition to saving hospitals money on services that are not reimbursed, researchers found that health systems in Medicaid expansion states averaged an $8.6 million increase in Medicaid revenue over the six years studied. Cash from Medicaid accounted for an average of 15% of all revenue hospitals in expansion states pocketed in 2017, compared to 10% of revenue for hospitals in states that had not expanded Medicaid. Medicaid expansion also improved providers’ average operating margins by 1.7 percentage points and excess margins by 2.2 percentage points.
Frederic Blavin, co-author of the study and a principal research associate at the Urban Institute, said the findings illustrate the positive impact Medicaid expansion has had on hospitals’ bottom lines. As the COVID-19 pandemic continues to wreak financial destruction on healthcare systems’ finances, he said that expanding Medicaid could be a way for states to support hospitals on the front-line in the fight against the virus, particularly those serving vulnerable populations.
“Right now, with COVID, where hospitals are under more financial constraints in terms of their loss of revenue with declines in outpatient care, the Medicaid expansion is something that is potentially helping keep hospitals stay afloat,” Blavin said.
For safety-net hospitals, which care for a large number of lower-income patients who are more vulnerable to severe cases of COVID-19, the cost savings are even higher.
Researchers found that uncompensated care costs dropped by $9.5 million over the six-year period studied. At non-safety-net hospitals, uncompensated care costs fell by $5.8 million during that time frame.
Medicaid expansion also increased profit margins for safety-net hospitals by 4 percentage points, double the profits pocketed among non-safety-net hospitals.
Blavin said policies that weaken Medicaid—like a job requirement—are particularly destructive for this group of providers, given that people with underlying health conditions are at greater risk for a serious case of coronavirus and chronic diseases are more common among those with lower incomes, many of whom live in the 12 states that have yet to expand Medicaid.
“Hospitals in these states would have a financial benefit if the state were to adopt Medicaid expansion, and that could potentially spill over into improved care for those populations,” Blavin said.