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Wednesday, July 23, 2014

Expanding Medicaid Contributes to a Decline in Hospital Losses on Charity Care

Dee Mahan

Andrea Callow

Associate Director of Medicaid Initiatives

UPDATE 9/25/14: The Obama administration reports that hospitals in states that expanded Medicaid will save $4.2 billion in uncompensated care costs in 2014.

The evidence of Medicaid’s positive impact on hospitals is growing. A recent report from the Colorado Hospital Association found that hospitals in states that have expanded Medicaid are providing free care to fewer uninsured patients. Such care, also known as “charity care,” occurs when patients cannot pay their hospital bills, and represents a significant drain on hospital resources.

The report examined data from 465 hospitals in 30 states—15 that have expanded Medicaid and 15 that have not. Across hospitals in states that expanded Medicaid, charity care declined 30 percent on average, from $2.8 million in the first quarter of 2013 to $1.9 million for the same time period this year. In non-expansion states, the average amount of charity care over the same period increased 10 percent, from $3.8 million to $4.2 million.

Local hospitals and consumers stand to gain the most from Medicaid expansion

The Colorado Hospital Association’s findings are echoed in other states. In Ohio, which expanded Medicaid in January, hospitals are already reporting a sharp decline in the volume of uninsured patients seeking free treatment, as well as greater financial stability as a result. The Arizona Hospital and Healthcare Association reported a significant decline in uncompensated care for the state’s hospitals, a decline that started in January when Arizona’s Medicaid expansion began. As data from more states become available, we anticipate seeing this trend repeated: less uncompensated care, greater financial stability.

Obviously, this trend benefits hospitals, as the financial loss associated with charity care hurts their bottom line. Hospitals are the backbone of our health care system, and financially stable hospitals make for stronger health systems that can better serve patients.

The connection between Medicaid expansion and charity care is also good for health care consumers. Hospitals pass the cost of charity care on to everyone in the health care system. The cost is passed on to insurers in the form of higher charges. Insurers then pass it on to consumers in the form of higher monthly premiums.

Hospitals suffer when states do not expand Medicaid

Hospitals in Medicaid expansion states can look forward to a brighter financial future. As we’ve written before, however, hospitals in states that have not made the choice to expand Medicaid cannot expect to fare as well. The data about Medicaid expansion and hospitals is mounting. And the message states should take away is clear: It makes good financial sense for states to accept federal funds to expand Medicaid.