The Impact of Medicaid Expansion on Uncompensated Care Costs

Early Results and Policy Implications for States

This brief explores the fiscal implications of Medicaid expansion, examining early data on expansion-related decreases in uncompensated care costs and related state budget implications.

The Issue

Uncompensated care costs are generated in situations where hospitals and other providers deliver services to patients for which they are not fully compensated, primarily because patients are uninsured or underinsured and unable to pay out-of-pocket for their services. The financial consequences of uncompensated care impact all health care stakeholders. Federal, state and local governments also devote significant funding to offset uncompensated care costs for essential providers.

Key Findings

  • Since implementation of the Affordable Care Act (ACA), states have experienced decreases in hospital uncompensated care costs related to previously uninsured residents gaining health coverage.

  • According to projections by the Assistant Secretary for Planning and Evaluation, uncompensated care costs in expansion states would decline by $5 billion in 2014, more than double the $2.4 billion reduction in non-expansion states.

  • While facilities in both expansion and non-expansion states have generally experienced decreases in the volume of admissions or discharges by uninsured patients, expansion states have had substantially greater declines.

  • States with uncompensated care pools that have not taken steps to reduce uncompensated care by covering people who could be eligible for Medicaid under the ACA expansion face the prospect of both the loss of Medicaid DSH funds, and restructuring or reduction of their uncompensated care pools, which substantially raises the fiscal stakes associated with the decision not to expand.

Conclusion

Since implementation of the ACA, states that have expanded Medicaid have experienced substantially greater decreases in uncompensated care costs than those that have not expanded.

About the Grantee

The State Health Reform Assistance Network (State Network) is a Robert Wood Johnson Foundation program dedicated to providing technical assistance to states in order to maximize coverage expansions under the Affordable Care Act (ACA). Learn more at www.statenetwork.org.