Thomas DeLeire, Karen Joynt, and Ruth McDonald
This report summarizes research on the effect of the major health insurance coverage expansion under the Affordable Care Act (ACA) on the drivers of uncompensated care (UCC) and on hospital UCC costs.
- Early hospital financial reporting and member surveys from hospital associations indicate that, through second quarter 2014, payor mix is shifting in ways that will likely reduce hospital uncompensated care costs. In particular:
- Volumes of uninsured/self-pay admissions (which comprise a major portion of uncompensated care provided by hospitals) have fallen substantially, particularly in “Medicaid expansion” states (states that have elected to expand the Medicaid program through the Affordable Care Act);
- Volumes of uninsured/self-pay emergency department visits have fallen substantially, primarily in Medicaid expansion states; and
- The volume of hospital admissions for patients covered by Medicaid has increased, but only in Medicaid expansion states.
- Initial projections suggest that uncompensated care costs will fall substantially following major insurance coverage expansion, including coverage expansion through both Medicaid and the Health Insurance Marketplaces. Specifically:
- Based on an estimated 10.3 million decrease in the total number of uninsured and an estimated 8 million increase in the number covered by Medicaid, ASPE estimates that hospital uncompensated care costs will be $5.7 billion lower in 2014 than they otherwise would have been. This represents a 16 percent reduction from baseline uncompensated care spending.
- The projections further suggest that $4.2 billion of this reduction will come from the 25 states plus Washington DC expanding Medicaid as of the beginning of FY2014, representing a 25 percent reduction from baseline uncompensated care spending and 74 percent of total savings. $1.5 billion will come from the 23 Medicaid non-expansion states, representing a 9 percent reduction from baseline uncompensated care spending and 26 percent of total savings. (note NH and PA have decided to expand Medicaid, but had not yet started enrolling individuals at the end of the second quarter of 2014, and therefore they are excluded from these analyses).
United States hospitals provide roughly $50 billion in uncompensated care to uninsured and underinsured patients annually. Under the Affordable Care Act, a major insurance coverage expansion is taking place; this expansion is anticipated to reduce uncompensated care as more and more Americans gain insurance coverage. First, this brief examines earnings reports from major for-profit U.S. hospital chains and finds that volumes of uninsured admissions have fallen by 50-70% in states that have expanded Medicaid, and by 2-14% in states that have not expanded Medicaid. Next, the brief uses cost report data to estimate the change in hospital uncompensated care costs as a result of insurance expansion, and finds that U.S. hospitals are projected to save $5.7 billion in uncompensated care costs in 2014. About three-quarters of these savings ($4.2 billion) will accrue to states that have elected to expand Medicaid, and about a quarter ($1.5 billion) to states that have chosen not to expand Medicaid.