Study estimates that in states where Medicaid has been expanded, hospitals' uncompensated care costs have decreased from 4.1 percentage points to 3.1 percentage points of operating costs.
In states that have expanded Medicaid to cover more low-income adults, the healthcare reform initiative is achieving a primary goal: cutting uncompensated-care costs at hospitals, research shows.
The research, published this week in the journal Health Affairs, was conducted by three professors at Northwestern University's Kellogg School of Management. The study examines uncompensated-care costs at 1,249 U.S. hospitals between 2011 and 2014.
"The Affordable Care Act represents the largest expansion in health insurance coverage in the United States since the creation of Medicare and Medicaid in the 1960s," the study says. "We provide the first broad-based national estimates of the decline in uncompensated care resulting from the enactment of the ACA."
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Medicaid expansion has reduced uncompensated care in states that have taken advantage of the program and represents a missed opportunity for the 19 states that have shunned Medicaid expansion, the study suggests.
It estimates that in states where Medicaid has been expanded, uncompensated care costs have decreased from 4.1 percentage points to 3.1 percentage points of operating costs.
"The reductions in Medicaid expansion states were larger at hospitals that had higher pre-ACA uncompensated care burdens and in markets where we predicted larger gains in coverage through expanded eligibility for Medicaid. Our estimates suggest that uncompensated care costs would have decreased from 5.7 percentage points to 4.0 percentage points of operating costs in nonexpansion states if they had expanded Medicaid."
The study's authors defined uncompensated care costs "as the sum of losses on charity care and bad debt." They based their findings on data collected from Medicare Hospital Cost Reports, which must be filed annually by all hospitals that receive payments from Medicare.
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States began adopting Medicaid expansion in 2014.
For 2014, Medicaid expansion had more of an impact on uncompensated care reductions than any other healthcare reform initiative on a national scale, the study says.
"Using the experience of expansion states as a guide, we predict that had nonexpansion states expanded Medicaid, uncompensated care costs in those states would be nearly 30 percent lower than they are today."
The study notes the Marketplaces, publicly administered health insurance exchanges that were also launched in 2014, could help reduce uncompensated care eventually. "Over time, enrollment in the ACA's health insurance Marketplaces, compliance with the individual mandate, and state Medicaid expansion decisions are all likely to lead to further changes in uncompensated care."
Furthermore, Medicaid expansion was found to have reduced uncompensated care variability between hospitals in states that have adopted the program.
"The reductions in uncompensated care costs in Medicaid expansion states in 2014 were driven by hospitals that had the highest levels of uncompensated care in 2013. … Because hospitals with the largest uncompensated care burdens saw the largest reductions after the Medicaid expansions, the variation in uncompensated care costs across hospitals in expansion states decreased."
Medicaid expansion appears, however, to have exacerbated uncompensated care variability on a state-by-state basis.
"The variation in uncompensated care among hospitals declined within expansion states, even as it increased across the states. From 2011 to 2013, hospitals located in nonexpansion states provided more uncompensated care costs than hospitals in expansion states, and the implementation of the ACA only served to increase this divide."