A study published in the Oct. 11 issue of JAMA shows that hospitals in the 19 states that expanded their Medicaid programs in 2014 had a significant decrease in their uncompensated care costs when compared with hospitals in states that did not expand Medicaid eligibility. They also saw a significant increase in Medicaid revenue and improved profit margins. 

The study sample included between 1,200 and 1,400 hospitals per fiscal year (2011 through 2014) in the states that expanded Medicaid, as well as between 2,200 and 2,400 hospitals per fiscal year in the 25 states without Medicaid expansion. Hospitals in states that expanded Medicaid before 2014 were excluded.

Medicaid expansion was associated with a significant decrease in mean uncompensated care costs of $2.8 million per hospital, a significant mean annual increase in Medicaid revenue of $3.2 million per hospital and significantly improved excess margins (mean of 1.1 percentage points), but not significantly improved operating margins. 

The study authors noted that the estimates for the financial margins were “less precise and robust” than the other findings and said further study would be necessary to assess the longer-term implications.

Our Take: We first started writing about this issue back in April 2015, when the Kaiser Family Foundation (KFF) published results from a study on Ascension Health—the massive, not-for-profit health system with 133 hospitals in 23 states and the District of Columbia. 

KFF found that Ascension hospitals in expansion states saw an 8.2 percent increase in Medicaid revenue and a 63.2 percent decrease in self-pay revenue, in contrast to non-expansion states, which reported a 9.4 percent decline in Medicaid revenue and 2.4 percent increase in self-pay. Charity care costs plummeted 40.1 percent in Medicaid states, versus 6.1 percent in non-expansion states.

We have now seen seven separate studies the effects of Medicaid expansion—most of them in peer-reviewed journals like NEJM, Health Affairs and now JAMA—and the results in every case come back strikingly similar. Hospital balance sheets are benefiting from reduced charity care and more patients are getting the care that they need. Taking the Medicaid money offered by the Federal government, no matter how politically difficult that was to swallow, appears to benefit both the previously uninsured and the hospitals that care for them.

The jury is out on whether the health of the Medicaid population is improving; the timeline to measure real improvement is much longer than for financial data.

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