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.

Highlight on Pennsylvania: Better Medicaid spending through technology

Pennsylvania lawmakers introduced legislation attempting to reduce spending and improve patient care within the state’s Medicaid program. Under the proposed legislation, Senate Bill 600, the state would adopt new technology to monitor and identify areas of unnecessary or wasteful health care services and procedures. The state would have 90 days within enactment of the bill to pick a technology company and implement the monitoring. Lawmakers noted that by providing more information, patients and providers, alike, could make better health care decisions. Consequently, this would reduce Medicaid spending. Pennsylvania is one of the highest spenders per Medicaid enrollee in the U.S., with one out of every four dollars in the state’s annual budget accounted for by Medicaid.

The lawmakers have started to review tech companies with prior experience in collecting and monitoring patients to improve care, notably companies that have worked with Alaska’s Medicaid program. The tech company involved  reduced misdiagnosis rates, improved outpatient care, cut waste, and reduced Medicaid expenditures in Alaska by over 14 percent. According to Pennsylvania lawmakers, a similar program could generate between $2 billion and $4 billion in annual savings.

In fiscal year 2015-16, the federal government spent about $15.3 billion on Medicaid in Pennsylvania, while the state spent about $10.6 billion, bringing the total to $25.9 billion; the state’s Department of Health and Human Services budget over the past few years has increased by about $500 million annually. The influx of approximately 700,000 new patients into the Medicaid system is a 20 percent increase and has cost an additional $4.6 billion. State lawmakers are concerned that the push for health care reform by the federal government will result in a cut in the federal portion of Medicaid to the state.

 

States adopting ACA’s health care provisions provide more access to care

The Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) “has significantly affected health insurance coverage and access among U.S. adults. However, the law gives states flexibility in implementing certain provisions, leading to wide variations between states in consumers’ experience,” according to a report issued on March 22, 2017, by the Commonwealth Fund. The Commonwealth Fund analyzed the Commonwealth Fund Biennial Health Insurance Survey, 2016, which was conducted by Princeton Survey Research Associates International, to compare the differences in insurance coverage, access to care, costs of care, and medical bill and debt problems in California, Florida, New York, and Texas, the nation’s four largest states.

Findings

The uninsured rate has fallen in all four states since 2012. The report noted the following variations for 2016:

  • The uninsured rates among adults age 19 to 64 varied from 7 percent in New York and 10 percent in California to 16 percent in Florida and 25 percent in Texas.
  • The proportions of residents reporting problems getting needed care because of cost was significantly lower in California and New York than in Florida and Texas.
  • Lower percentages of Californians and New Yorkers reported having a medical bill problem in the past 12 months or have accrued medical debt compared to Floridians and Texans.
  • The uninsured rates for young adults were 8 percent in California, 10 percent in New York, 23 percent in Florida, and 30 percent in Texas.
  • The uninsured rates for adults with incomes below the federal poverty level were 9 percent in California, 15 percent in New York, 22 percent in Florida, and 39 percent in Texas.
  • Adults in small firms are more likely to be uninsured in Florida (24 percent) and Texas (37 percent) than in California (14 percent) or New York (12 percent).
  • Cost-related access problems impacted 28 percent of Californians, 29 percent of New Yorkers, 41 percent of Floridians, and 45 percent of Texans.
  • Medical debt impacted 29 percent of Californians and New Yorkers, while 41 percent of Floridians and 44 percent of Texans were impacted by medical debt.

Factors influencing variations

Factors that might explain the variations include (1) whether the state expanded Medicaid eligibility, (2) whether it ran its own health insurance marketplace, (3) what the uninsured rate was prior to the ACA, (4) differences in the cost protections provided by private health plans; and (5) demographic differences.

California and New York both operate their own health insurance marketplaces and have expanded eligibility for Medicaid to adults with incomes at or below the federal poverty level. Florida and Texas use the federal marketplace to enroll residents in health plans and did not expand Medicaid eligibility. In addition, the report noted that the higher rate of insurance coverage and lower deductibles in California and New York likely played a role in the two states’ lower rates of cost-related access problems.

Although Florida and Texas experienced enrollments in private plans through the health insurance marketplace, they have made less progress covering uninsured residents. Of the four states included in the report, Texas had the highest uninsured rate in every age group for 2016. A contributing factor for Texas’ higher uninsured rate is the number of undocumented immigrants residing in Texas. The ACA does not provide access to any new coverage options for undocumented immigrants.

Will the AHCA affect Medicaid’s nonelderly adults with disabilities?

The changes to Medicaid under the American Health Care Act (AHCA), as approved by the House Energy and Commerce Committee, carries potential implications for the nearly seven million nonelderly adults with disabilities currently covered under Medicaid, according to a Kaiser Family Foundation (KFF) issue brief. KFF’s issue brief describes how the AHCA would change Medicaid and offers insight on its potential effect upon nonelderly adults with disabilities by examining the type of insurance nonelderly adults with disabilities have, how they qualify for Medicaid, what their characteristics are, what services they receive from Medicaid, and how much Medicaid spends on the disabled.

The AHCA would change Medicaid in three major ways: (1) it would change Medicaid’s financing structure to a per capita cap, resulting in an estimated $880 billion reduction in federal Medicaid spending from 2017 to 2026, according to the Congressional Budget Office (CBO cost estimate of AHCA) (see CBO: Republican plan saves billions as 24M lose coverage, Health Law Daily, March 14, 2017); (2) it would repeal the enhanced federal matching funds for Patient Protection and Affordable Care Act’s (ACA, section 2001) (P.L. 111-148) enrollees as of January 1, 2020, except for those enrolled by December 31, 2019, who do not have a break in eligibility of more than one month; and (3) it would end the enhanced federal matching funds for Community First Choice (CFC) (ACA, section 2401), which provides attendant care services for people with disabilities, as of January 1, 2020 (see ‘American Health Care Act’ earns first stamp of approval, Health Law Daily, March 9, 2017).

Here is a summary of the KFF findings:

  • Type of health insurance. Thirty-six percent of nonelderly adults with disabilities are working for pay compared to 77 percent of those without disabilities. Among those who are working, 64 percent have access to employer-sponsored health insurance, compared to 68 percent of nondisabled workers. Thirty-one percent of nonelderly adults with disabilities have Medicaid, compared to 10 percent of those without disabilities. Only 41 percent have private insurance, compared to 74 percent of those without disabilities.
  • How do they qualify for Medicaid? KFF found that some nonelderly adults with disabilities are eligible for Medicaid through the ACA’s Medicaid expansion and some through a disability-related pathway based on both their low income and functional limitations.
  • Nearly 85 percent of nonelderly adults with disabilities have incomes below 200 percent of the federal poverty level (FPL) ($24,120 per year for an individual in 2017). Fifty-seven percent are white, 23 percent black, 16 percent Hispanic, and 3 percent Asian. About one-third of those enrolled in Medicaid have three or more functional limitations, which is more than two and one-half times the rate for those disabled who are privately insured and more than double the rate of those who are uninsured.
  • What services do they receive from Medicaid? Through Medicaid, nonelderly adults with disabilities have access to regular preventive care as well as medical care for illnesses and chronic conditions. States must provide certain minimum services for adults, such as inpatient and outpatient hospital, physician, lab and x-ray, and nursing home services. States also can choose to provide a broad range of optional services, including prescription drugs, physical therapy, private duty nursing, personal care, rehabilitative services, and case management. Most home and community-based services (HCBS) are also provided at the option of the state.
  • ACA expansion options. Section 2001 of the ACA offered states the option to expand Medicaid to nearly all nonelderly adults with income up to 138 percent of the FPL. As of 2017, 32 states have adopted the expansion. Section 2401 of the ACA created the CFC option to provide attendant care services and supports with a 6 percent enhanced federal matching funds. Eight states elected this option as of 2016. Section 2402 of the ACA also allowed states (17 as of 2015) to offer HCBS through the section 1915(i) option ( Sec. Act §1915(i)), which allows states to serve people with functional limitations that do not yet rise to an institutional level of care. Section 2703 of the ACA also created the Medicaid health homes option, which enables states (22 as of 2016) to provide care coordination services for people with chronic conditions at a 90 percent enhanced federal match for the first two years.
  • How much does Medicaid spend on people with disabilities? As of 2011, people with disabilities accounted for 15 percent of total Medicaid enrollment but 42 percent of program spending. Per enrollee spending for people with disabilities totaled $16,643 in 2011, more than five times higher than for adults without disabilities ($3,247) and nearly seven times higher than for children without disabilities ($2,463). One-half of states spend between $15,000 and $19,999 per enrollee for people with disabilities, and another third of states spend between $20,000 and $34,999 per enrollee for people with disabilities.

KFF believes that the AHCA’s per capita cap and elimination of the enhanced federal financing under the ACA expansion will put the states under budgetary pressures due to a reduction in Medicaid funds. It believes that these budgetary pressures may result in the limitation of Medicaid services for recipients, including the nonelderly disabled. KFF believes that careful consideration of the AHCA implications is warranted.