Affordable Care Act’s Medicaid Expansion Improved Hospitals’ Financial Performance

The Affordable Care Act’s expansion of Medicaid to include coverage for childless adults has improved hospitals’ financial performance and substantially reduced the likelihood of hospital closures, according to an AHRQ-funded study in Health Affairs. The increased Medicaid coverage for previously uninsured people reduced hospitals’ costs for uncompensated care, strengthening the facilities’ bottom line, researchers concluded. The study, based on 2008–2016 data on hospital closures and financial performance, found the impact of Medicaid expansion was most pronounced for hospitals in rural markets and counties with large numbers of uninsured adults before Medicaid expansion. Study authors said future federal efforts to reform Medicaid policy should consider the strong relationship between Medicaid coverage levels and the financial viability of hospitals. Access the abstract.

2018 Jan;37(1):111-120. doi: 10.1377/hlthaff.2017.0976.

Understanding The Relationship Between Medicaid Expansions And Hospital Closures.

Lindrooth RC1, Perraillon MC2, Hardy RY3, Tung GJ4.

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Abstract

Decisions by states about whether to expand Medicaid under the Affordable Care Act (ACA) have implications for hospitals' financial health. We hypothesized that Medicaid expansion of eligibility for childless adults prevents hospital closures because increased Medicaid coverage for previously uninsured people reduces uncompensated care expenditures and strengthens hospitals' financial position. We tested this hypothesis using data for the period 2008-16 on hospital closures and financial performance. We found that the ACA's Medicaid expansion was associated with improved hospital financial performance and substantially lower likelihoods of closure, especially in rural markets and counties with large numbers of uninsured adults before Medicaid expansion. Future congressional efforts to reform Medicaid policy should consider the strong relationship between Medicaid coverage levels and the financial viability of hospitals. Our results imply that reverting to pre-ACA eligibility levels would lead to particularly large increases in rural hospital closures. Such closures could lead to reduced access to care and a loss of highly skilled jobs, which could have detrimental impacts on local economies.