Spending from Filling the Medicaid Coverage Gap Would Outweigh Cuts in Disproportionate Share Hospital Payments

Provisions in the Build Back Better Act would extend health coverage to millions of people in the 12 states that have not expanded Medicaid under the Affordable Care Act (ACA).

The Issue

The current draft of the Build Back Better Act (BBBA) includes provisions that would extend enhanced ACA subsidies to people below 100 percent of the federal poverty limit in the 12 states that have not expanded Medicaid. These provisions are expected to extend health insurance coverage to millions of people and to lower the cost of health care for many families. Analysis compares these provisions to provisions that cut Medicaid disproportionate share hospital allotments to assess the BBBA’s overall impact on hospitals in nonexpansion states.

Key Findings

• Hospitals in nonexpansion states would see more than $6.8 billion in new spending as a result of the Build Back Better Act’s closing of the Medicaid gap, which is about 15 times larger than the expected disproportionate share hospital allotment cuts of $444 million.
• Overall, new federal health subsidies disbursed to nonexpansion states for people in the coverage gap would be $19.6 billion.
• Florida, Texas, Georgia, and North Carolina hospitals are among those that would have the most substantial increases in spending because of added coverage.
• The benefits of the changes would not necessarily go to the same hospitals that would sustain reductions in DSH allotments. Thus, some hospitals may be worse off with the proposed changes.

Conclusion

Though only a portion of the total increased federal spending under the Build Back Better Act provisions would flow to hospitals, researchers conclude that in the years during which additional subsidies would be provided, hospitals would be substantially better off overall than they are under current law, even after proposed Medicaid DSH cuts are taken into account.

About the Urban Institute

The nonprofit Urban Institute is dedicated to elevating the debate on social and economic policy. For nearly five decades, Urban scholars have conducted research and offered evidence-based solutions that improve lives and strengthen communities across a rapidly urbanizing world. Their objective research helps expand opportunities for all, reduce hardship among the most vulnerable, and strengthen the effectiveness of the public sector. Visit the Urban Institute Health Policy Center for more information specific to staff and recent research.