CHA News Article

Report Examines Medicaid Hospital Payments Post-ACA Coverage Expansions

A new report from the Kaiser Family Foundation (KFF) examines the impact of Medicaid payments to hospitals and other providers on those providers’ finances, and the ultimate effect on beneficiaries’ access to care. The brief provides an overview of Medicaid payments for hospitals and explores the implications of the Affordable Care Act’s (ACA) Medicaid expansion, as well as payment policy changes, on hospital finances.

Key findings include:

  • Overall, hospitals have benefitted financially from the ACA coverage expansions and the increase in Medicaid payments, especially in states that expanded Medicaid coverage. Analysis of the Medicare Cost Report data for 2013 and 2014 shows overall declines in uncompensated care from $34.9 billion to $28.9 billion in 2014 nationwide. Nearly this entire decline occurred in expansion states, where uncompensated care costs were $10.8 billion in 2014 and fell 35 percent, to $5.7 billion, in 2013.
  • While hospitals expected to benefit financially from the Medicaid expansion, they expected some gains from the reduction in uncompensated care to be offset by volume-generated increases in Medicaid payments that may be lower than cost. The data are not reliable enough to support nationwide analysis of the extent to which this has occurred, and the effect would vary across hospitals.
  • Despite the decrease in uncompensated care, other changes to Medicaid payment policy (such as required reductions to disproportionate share hospital payments and policy changes to limit the use of other supplemental payments) are likely to have a more substantial effect on Medicaid hospital payment and overall hospital financial performance in the future. Ultimately, the impact of reductions in supplemental payments will depend on decisions by state governments to offset reductions with increases to Medicaid base rates paid to hospitals.