Medicaid Expansion Opt-Outs and Uncompensated Care

The U.S. Supreme Court decision on the Affordable Care Act (ACA) ruled that Medicaid expansion move forward as an option for states. While ACA’s reforms were designed to move the U.S. toward universal coverage, the option for states to forgo Medicaid expansion may have unintended consequences regarding uncompensated care.

This article addresses the issue of payment reductions under the Medicare and Medicaid Disproportionate Share Hospital (DSH) programs. Using coverage and income data from the American Community Survey with state data on Medicaid DSH allotments and Medicare cost reports, this article analyzed two scenarios: (1) total DSH reduction if a state fully expands Medicaid; and (2) DSH changes if the state forgoes expansion.

Key Findings:

  • On average, hospitals would receive $194 in DSH funds per patient-day, assuming current funding. However, significant geographic differences in DSH funds would persist.
  • If every state expanded its Medicaid program and DSH-program changes were implemented, total DSH funding would decrease $56 per patient-day.
  • States forgoing Medicaid expansion through ACA may leave substantial uncompensated-care burden on hospitals if no changes to DSH formulas occur or a full expansion of coverage to the uninsured with incomes below the poverty line does not occur.

Understanding the fiscal implications is important for states to consider as they make decisions for its citizens and health care providers.

Grantee Spotlight

State Health Access Reform Evaluation   

Synopsis of the Work: The initial projects funded under the State Health Access Reform Evaluation (SHARE) program focused on affordability, sustainability, or administrative efficiency of state-level health reform. Starting in September 2010, the program began funding research and evaluation of implementation of the ACA at the state level. The program was reauthorized in October to develop an evidence-based resource for policy-makers seeking to learn about the successes and challenges of the implementation process.

Key Results: As of January 2012, the program has funded 19 state evaluation proposals. Projects included an evaluation of the impact of outreach and enrollment strategies in California; an assessment of the first use of auto-enrollment for a state coverage expansion; an evaluation of reforms to cover all children in the states of Illinois, Pennsylvania, and Washington; and an evaluation of risk selection in market-based state programs.