So far, 26 states plus the District of Columbia have expanded Medicaid while 24 have not. Many of the expansion states also set up robust insurance exchanges and enrollment efforts, further reducing uncompensated care.
After the U.S. Supreme Court in 2012 made Medicaid expansion voluntary for states under the Affordable Care Act, the issue became highly partisan, with many Republican governors and legislative leaders opposing expansion. They often argue that the federal government will renege on its commitment to pay for the lion's share of the expansion, and that states will have to eat the costs.
In states that have not expanded Medicaid, that policy decision poses a double-whammy for hospitals. Not only do they miss out on having a greater number of paying patients, under Obamacare they also will see phased-in cuts to disproportionate-share hospital payments, which help make up some of their shortfall for delivering uncompensated care.
“The theory was those payments would become less necessary as more people gain coverage,” said Judy Solomon, vice president for health policy at the liberal Center on Budget and Policy Priorities. “That's playing out exactly as planned in the states that have expanded. I think that sends a message, particularly for states in the Deep South that rely heavily on DSH payments.”
The Colorado Hospital Association produced some of the earliest data on the effect of Medicaid expansion through its study of 465 hospitals in 30 states. It found that in the first quarter of 2014, hospitals in expansion states saw Medicaid charges account for 18.8% of their total revenue, an increase of 3.5 percentage points over the first quarter of 2013. Also, self-pay charges fell to 3.1% of the total, down from 4.7%. And the average amount of charity care per hospital declined to $1.9 million from $2.8 million—a decrease of 32.1%.
In contrast, Medicaid and self-pay charges at hospitals in nonexpansion states remained steady at 13.6% and 5% of total charges, respectively. These hospitals delivered an average of $4.2 million in charity care, a 10.5% increase from $3.8 million during the first quarter of 2013.
At Tenet Healthcare Corp., the number of uninsured and charity-care admissions in its five Medicaid expansion states—where it has about a third of its beds—fell 54% in the second quarter compared with the same period last year. The decline was 8% in nonexpansion states. Tenet's Medicaid admissions increased 23% in expansion states and 3% in non-expansion states.
Tenet CEO Trevor Fetter said that at least some of the increased volume could be due to high utilization among the newly insured. “There's undoubtedly pent-up demand for health needs in that population,” he said.
Fetter also attributed Tenet's results to its outreach efforts, such as training employees at Conifer, its revenue-cycle management arm, to serve as certified application counselors and guide patients through insurance exchange and Medicaid enrollment. “Within the states that did expand, our strategy has been to be very active in educating people about their enrollment options,” he said.
In some states, the impact of Medicaid expansion has been harder to see in hospital earnings reports. In Vermont, for instance, Medicaid eligibility for childless adults already started at 150% of the federal poverty line. But other expansion states such as Kentucky, West Virginia and Arkansas previously had much less generous Medicaid programs. In those states, the financial benefit to hospitals of Medicaid expansion has been sizable and swift.
For example, in Michigan, which expanded Medicaid through its Healthy Michigan program starting April 1, Tenet's uninsured and charity admissions declined 85% and Medicaid volume increased 26%. “That's a very pronounced and immediate effect,” Fetter said. Tenet had entered Michigan through its 2013 acquisition of Vanguard Health Services and has five hospitals in the Detroit metro region.
Healthy Michigan has been enrolling individuals at a rapid clip and has exceeded expectations. Wayne County—which includes the Detroit metro region where many of the state's largest health systems are located—saw 28% of the new enrollees even though it accounts for only 17% of the state's population, said Josh Fangmeier, a health policy analyst at the University of Michigan Center for Healthcare Research and Transformation.
Although many of Michigan's systems have yet to report second-quarter results, MidMichigan Health, a four-hospital system based in Midland, reported an 8.8% year-over-year increase in Medicaid charges as a percentage of total revenue after seeing the number of Medicaid charges decline 1.1% in the first quarter. In addition, its surplus nearly tripled in the second quarter compared with the same quarter last year, which an earnings report attributed to higher outpatient activity compared to the prior-year period. MidMichigan did not respond to a request for comment.
St. John Providence Health System, a Detroit-based subsystem of Ascension Health, has helped 4,200 patients sign up for Medicaid and 2,000 have been approved so far, an Ascension spokesman said.