Medicaid expansion in California, by many accounts, has been a success. The number of uninsured fell to just 11% of the population as of 2014, down from 16% the year before, one of the biggest drops in the country. More than a third of the state's residents now have Medicaid.
Providers are seeing the impact of that expanded coverage—and it's not all positive. The program, known as Medi-Cal, is one of the lowest paying in the country relative to Medicare rates. And providers are still operating under recession-era cuts that have not been dialed back even as the state has returned to a surplus.
Consumer advocates, meanwhile, are pushing the state to expand Medicaid rosters even further by extending Medi-Cal benefits to unauthorized immigrants. One bill pending in the state Legislature, SB 1418, would offer health benefits to low-income residents regardless of immigration status.
In its third-quarter earnings report last month, San Francisco-based Dignity Health showed some of the first signs that higher Medicaid volume is not translating into higher earnings. At a time when many hospitals are seeing decreases in admissions, Dignity reported a 1.5% increase in patient volume, or 3.8% higher when adjusted for outpatient activity.
But the costs of caring for these patients grew faster, leading to an operating loss of $41.7 million on $3.2 billion in revenue for the quarter ended
March 31. Its operating margin fell to negative 1.3% from a positive margin of 1.3% during the same period last year.
“When you're treating lots and lots of Medicaid and less commercial, that's a swing that goes right to the numbers,” said Martin Arrick, an analyst at Standard & Poor's.
In response, Dignity has launched initiatives to bring its costs in line with revenue, including a marketing campaign for commercially insured patients.