Hospitals and other providers

The Affordable Care Act and Medicaid

Following implementation of the Patient Protection and Affordable Care Act (ACA, P.L. 111-148, as amended), state uninsured rates declined in most states, particularly in states that chose to adopt the Medicaid expansion (CMS 2017). Research has indicated that reductions in the uninsured rate have resulted in reductions in uninsured hospitalizations. For example:

  • An article in Health Affairs examining the relationship between Medicaid expansion and hospital closures found that expansion was associated with improved hospital financial performance and a lower likelihood of closure, particularly in rural areas and in counties that had high uninsured rates among adults prior to Medicaid expansion (Lindrooth et al. 2018).
  • A 2017 study examining changes in inpatient payer mix and hospitalizations following Medicaid expansion found that the share of uninsured discharges fell in Medicaid expansion states and the share of Medicaid discharges increased, even in states with baseline uninsured rates below the median.(Freedman et al. 2017).
  • Another article published in 2016 found that expansion states experienced sharp decreases in uninsured hospital stays and increases in Medicaid-covered hospital stays, while non-expansion states experienced no change in payer mix (Nikpay et al. 2016).
  • An article in Health Services Research examined the impact of Medicaid expansion in nine expansion states and found that following expansion, safety net and non-safety net hospitals experienced similar decreases in uninsured utilization, but non-safety net hospitals experienced a greater increase in Medicaid utilization (Wu et al. 2018).

Some research has indicated that declines in uninsured hospitalizations have resulted in declines in hospital uncompensated care. For example, a 2015 study examining the impact of early Medicaid expansion in Connecticut found that it was associated with increased Medicaid discharges and Medicaid revenue, and estimated that hospital uncompensated care was approximately one-third lower than it would have been without the early expansion (Nikpay et al. 2015).

Disproportionate share hospitals

Medicaid disproportionate share hospital (DSH) payments are statutorily required lump-sum Medicaid payments to hospitals that serve high numbers of low-income patients. They supplement regular Medicaid payments for hospital services and are intended to improve the financial stability of safety-net hospitals to preserve access to necessary services for low-income patients. In 2016, Medicaid made $19.7 billion in Medicaid DSH payments ($8.5 billion state and $11.2 billion federal).

In anticipation of decreased uncompensated care costs due to the coverage expansions under the ACA, the law established a series of Medicaid DSH allotment reductions that were initially scheduled to begin in fiscal year (FY) 2014. As a step toward better alignment of allotments with the purpose of DSH payments, Congress also required the Centers for Medicare & Medicaid Services (CMS) to develop a methodology that would apply greater reductions to states with low uninsured rates and states that do not target their DSH payments to hospitals with high levels of Medicaid and uncompensated care. However, these reductions have been delayed multiple times, and are currently scheduled to begin in FY 2020.

Uninsured rates declined in most states – both expansion and non-expansion – in 2014 (CMS 2017). Analysis by MACPAC and others have indicated that decreases in the uninsured rate have resulted in large reductions in uncompensated care for hospitals located in expansion states, but had no observable reductions for hospitals located in non-expansion states. In expansion states, the costs of underpaid Medicaid services (often referred to as Medicaid shortfall) for hospitals increased by about $0.9 billion, but declines in unpaid costs of care for the uninsured were much larger, amounting to $5.8 billion. These large declines in hospital uncompensated care, however, have not translated to large improvements in overall hospital finances. In addition, it is not yet clear whether all hospitals, including those serving the highest numbers of low-income patients are experiencing changes in uncompensated care and declining uninsured rates equally.

Primary care

The temporary Medicaid primary care payment increase required that all state Medicaid programs increase payment for certain primary care services to Medicare payment levels during calendar years 2013 and 2014. The payment increase was intended to address the need to maintain provider networks as the ACA was expected to cover millions of additional enrollees.

States reported early implementation challenges, although these were largely resolved by 2014. Nevertheless, whether the primary care payment increase affected access to primary care remains unclear. Studies in some states found that providers increased the number of Medicaid patients they were willing to see, or that Medicaid appointment availability increased concurrent with the payment increase. However, the eight states interviewed by MACPAC reported that the payment increase had little effect on recruiting Medicaid primary care providers, as few providers who participated in the increase were new to Medicaid. Moreover, some providers may not have been aware of the payment increase.

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