Healthcare News & Insights

HHS: Expanding Medicaid under healthcare reform will save hospitals billions this year

177782000The financial picture is looking better for hospitals in states that have expanded Medicaid coverage as part of the Affordable Care Act (ACA). Reason: The cost of uncompensated care for those hospitals is likely to go down by billions of dollars this year. 

Expanded insurance coverage brought about by the ACA should save hospitals $5.7 billion in uncompensated care costs this year, as estimated by the Department of Health and Human Services (HHS).

And of that amount, $4.2 billion of the savings will be attributed to hospitals headquartered in states that have expanded Medicaid.

Crunching the numbers

Info from an HHS report about the effects of the ACA on uncompensated care suggest that, in the year since the law made it possible for states to expand Medicaid, almost 8 million more people have been able to obtain insurance coverage.

To analyze the effect of this on hospitals, the report used data from several for-profit hospital systems that self-reported information about earnings and admissions for the first two quarters of 2014. HHS compared this info with their numbers from 2013.

In the first quarter of 2014, while all hospitals experienced a decline in the number of admitted patients who were uninsured, hospitals in Medicaid expansion states saw anywhere from a 28% to a 33% decline in uninsured patients.

There was also a decline in emergency department visits by uninsured people overall. The difference was negligible for hospitals in states without expanded Medicaid coverage. But in states where Medicaid’s been expanded, hospital ED use by uninsured patients decreased anywhere from 16% to 28%.

By the second quarter of 2014, admissions for uninsured people declined even more sharply for hospitals in states with expanded Medicaid coverage. In fact, the number of admitted patients without insurance for these hospitals decreased between 48% and 72% when compared with data from the second quarter of 2013.

ED use by the uninsured also went down in the hospitals surveyed in the second quarter of 2014, compared to last year’s rates. Hospitals in states with increased Medicaid eligibility experienced anywhere from 26% to 60% fewer visits from patients without insurance coverage.

Both rural and urban hospitals in these states experienced declines, so the trend isn’t just contained to a specific type of hospital.

And these decreases aren’t just due to a general decrease in patient volume. In fact, from 2013 to now, the report states hospitals have experienced an increase in patient volume overall – likely due to more patients having access to health insurance because of the ACA.

In states where Medicaid enrollment has expanded, the increased number of Medicaid patients seems to be a major contributor to higher patient volume. The number of Medicaid patients admitted to hospitals in these areas increased anywhere from 4% to 31% in the first quarter of 2014, compared to 2013. Naturally, in the other states, no significant change was detected in Medicaid patients.

For the second quarter of this year, hospitals in states with more Medicaid patients experienced further growth in patient volume. Medicaid admissions went up between 17% and 32% in these states. Again, no difference was noted in states that chose not to expand their Medicaid programs.

Effects on care costs

From this data, HHS concluded that the rates of uncompensated care should decline for hospitals this year. In fact, preliminary numbers from some of the hospitals surveyed suggest that, by second quarter of 2014, bad debt was already decreasing.

If these statistics ring true for hospitals nationwide, HHS projected that hospitals will have substantial savings because they’ll be providing less uncompensated care. Those in states that haven’t expanded Medicaid will save $1.5 billion, while hospitals in expansion states will save over twice that amount: $4.2 billion.

Together, this represents a total savings of 16% of the baseline amount for uncompensated care spending in hospitals nationwide.

Future implications for hospitals

Because hospitals will soon be facing sharp cuts in funding from the feds for providing charity care, it’s important to know just how much of an impact ACA changes will have on your hospital’s bottom line. Hospitals in states that have expanded Medicaid coverage will likely weather the storm better than others.

So far, 27 states have expanded Medicaid coverage. Two of them (Pennsylvania and New Hampshire) have just gotten on the bandwagon. For hospitals in states where expansion hasn’t happened yet, it may be helpful to partner with your state’s hospital association, or the American Hospital Association, to find out how you can lobby for this change on your facility’s behalf.

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