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Title: Uncompensated Care Decreased At Hospitals In Medicaid Expansion States But Not At Hospitals In Nonexpansion States

Citation Type: Journal Article

Publication Year: 2016

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Abstract: One pillar of the Affordable Care Act (ACA) was its expected impact on the growing burden of uncompensated care costs for the uninsured at hospitals. However, little is known about how this burden changed as a result of the ACAs enactment. We examine how the Affordable Care Act (ACA)s coverage expansions affected uncompensated care costs at a large, diverse sample of hospitals. We estimate that in states that expanded Medicaid under the ACA, uncompensated care costs decreased from 4.1 percentage points to 3.1 percentage points of operating costs. The reductions in Medicaid expansion states were larger at hospitals that had higher pre-ACA uncompensated care burdens and in markets where we predicted larger gains in coverage through expanded eligibility for Medicaid. Our estimates suggest that uncompensated care costs would have decreased from 5.7 percentage points to 4.0 percentage points of operating costs in nonexpansion states if they had expanded Medicaid. Thus, while the ACA decreased the variation in uncompensated care costs across hospitals within Medicaid expansion states, the difference between expansion and nonexpansion states increased substantially. Policy makers and researchers should consider how the shifting uncompensated care burden affects other hospital decisions as well as the distribution of supplemental public funding to hospitals. The Affordable Care Act (ACA) represents the largest expansion in health insurance coverage in the United States since the creation of Medicare and Medicaid in the 1960s. According to the Census Bureau, nearly nine million previously uninsured Americans gained health coverage between 2013 and 2014, largely through the state-based Medicaid expansions that were enacted in twenty-eight states plus the District of Columbia and through the new individual insurance Marketplaces established in states nationwide. An often stated reason for the ACAs passage was the rising burden on both patients and hospitals as a result of uncompensated care for uninsured people. However, little is known to date about new insurance enrollees hospitalization rates or whether they were able to pay for medical services before the ACA took effect. Given this fact, it is unclear by how much the uncompensated care burden on hospitals should have fallen as a result of the ACA. To address this gap in knowledge, we provide the first broad-based national estimates of the decline in uncompensated care resulting from the enactment of the ACA. These estimates are important for several reasons. First, we show which components of the ACA have had the most immediate impact on uncompensated care. Specifically, we find that reductions in uncompensated care costs almost exclusively occurred in states with Medicaid expansions, with little additional reduction to date in nonexpansion states. Our analysis implies that uncompensated care costs in Medicaid expansion states fell from 4.1 percentage points of operating costs to 3.1 percentage points of operating costs. In nonexpansion states, uncompensated care costs continued close to their existing trend, remaining at approximately 5.7 percentage points of hospitals operating costs. We present a number of facts to corroborate that the decreases in uncompensated care costs in expansion states were in fact due to the Medicaid expansion. Then, using the experience of expansion states as a guide, we predict that had nonexpansion states expanded Medicaid, uncompensated care costs in those states would be nearly 30 percent lower than they are today. Although this estimate is hardly dispositive, the absence of a decrease and the lack of a break from trend in uncompensated care costs in nonexpansion states suggest that the other coverage expansion policiesthe individual mandate and the health insurance Marketplaces that also pertain to nonexpansion states, for examplehave to date had little effect on the uncompensated care burden faced by hospitals. Our analysis also provides important information about the evolving incidence of uncompensated care costs both within and across states. Hospitals vary dramatically in the burden of uncompensated care costs that they face, which in turn affects both access to health care and the generosity of existing charity care programs. We find that within expansion states, ACA policies have eliminated about one-third of the differences in uncompensated care burdens across hospitals, but substantial differences still remain. Because uncompensated care costs were higher in nonexpansion states prior to the ACA, the differences in uncompensated care burdens across hospitals located in expansion and nonexpansion states are especially evident. A burgeoning literature exists on the ACAs effects on hospital finances. Peter Cunningham, Rachel Garfield, and Robin Rudowitz examined how financial outcomes changed at Ascension Health during the first nine months of 2014. Their study compares changes at hospitals in Medicaid expansion and nonexpansion states. Sayeh Nikpay, Thomas Buchmueller, and Helen Levy examined the effects of Connecticuts Medicaid expansion on Medicaid discharges and on uncompensated care. The Department of Health and Human Services Office of the Assistant Secretary for Planning and Evaluation recently estimated that the ACA caused a 21 percent reduction in hospital uncompensated care, but this was based on only a sample of for-profit hospital financial reports and lacked specific data the impact of the expansion in particular hospital markets. Our study adds to this literature by examining a larger and more diverse sample of hospitals. This sample enabled us to examine variation in the ACAs impact on uncompensated care across different types of hospitals based on both ownership status and the estimated local impact of the Medicaid expansion. And we do use the actual effect of the ACA on a wide set of hospitals to predict how much Medicaid expansions would decrease uncompensated care in nonexpansion states.

Url: http://content.healthaffairs.org/content/35/8/1471.full

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Authors: Dranove, David; Garthwaite, Craig; Ody, Christopher

Periodical (Full): HealthAffairs

Issue: 8

Volume: 35

Pages: 1471-1478

Data Collections: IPUMS CPS

Topics: Health, Other

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