ACA’s Medicaid expansion helped hospitals get paid $6B more

Hospitals in states that expanded Medicaid under the ACA saw large reductions in uncompensated care between 2013 and 2015, realizing estimated savings of $6.2 billion. Overall, those states’ uncompensated care burdens fell from 3.9 percent of operating costs to 2.3 percent, according to an issue brief from the Commonwealth Fund, which analyzed Medicare Hospital Cost Reports from 2011 to 2015.

Section 2001 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) expanded Medicaid eligibility to nonelderly adults with incomes up to 138 percent of the federal poverty level (FPL). In National Federation of Independent Business v. Sebelius (2012), the Supreme Court held that states could not be required to expand Medicaid eligibility, essentially allowing states to choose whether to expand their programs. One of the purposes of the ACA’s Medicaid expansion was to reduce uncompensated care—that is, a hospital’s losses on charity care and bad debt.

The researchers compared hospital uncompensated care burdens and found a marked decline in uncompensated care costs for hospitals in states that expanded Medicaid between 2013 and 2014, and continuing into 2015. There was no similar decline in nonexpansion states. The results were found across hospitals with both high and low levels of uncompensated care prior to 2014, though hospitals with the highest levels of uncompensated care saw the largest benefit from Medicaid expansion. The researchers therefore concluded that Medicaid expansion met the ACA’s goal of reducing uncompensated care burdens for hospitals, and noted that if the 19 states that have not yet expanded Medicaid eligibility were to expand, those states would also save over $6 billion in uncompensated care costs.