Urban Institute: Hospitals will reap $293B in additional revenue under Medicaid expansion
New research from the Urban Institute and the Robert Wood Johnson Foundation shows that hospitals can expect to pull in an additional $293.9 billion dollars between 2013 and 2022 if all states opt to expand Medicaid as outlined in the Affordable Care Act.
The expansion will see hospital Medicaid reimbursements rise by 22.8 percent over what they would be with the ACA expansion. While many people currently with private insurance (and thus a higher reimbursement rate) will move to Medicaid under the expansion of the program, that shift will be more than offset by the vast number of new patients who will gain Medicaid coverage who previously had no insurance.
When taken together, the research indicates that hospitals stand to gain $2.59 from increased Medicaid revenue for every dollar lost from private insurance due to the expansion. While the increases for hospitals can be significant under an expansion by all 50 states, the report warns that states opting out strikes at some of the underpinnings of the law.
"Medicaid expansion will yield tremendous financial gains for most hospitals, despite modest offsetting losses in private revenues," the report states. "The Supreme Court's decision to make the Medicaid expansion optional for states jeopardizes the ACA's implicit bargain with hospitals – namely, significant payment cuts in exchange for significant increases in the number of patients with insurance."
While the ACA seeks to expand the number of people with Medicaid and private insurance to the tune of $1.5 trillion over 10 years to finance these changes, it funds a significant part of this expansion by changes in the payment funding formula for hospitals. In total, 10-year payment reductions to disproportionate share hospitals (DSH) will total $22 billion in Medicaid and $34 billion in Medicare. ACA also looks to save an addition $260 billion over 10 years in cuts to the Medicare fee-for-service payment schedule.
That means that hospitals in states that don't expand Medicaid will be faced with both lower reimbursements without the promise of increased overall revenue from the newly insured Medicaid population and the resultant decrease in uncompensated care.
The report notes that the Supreme Court's decision last summer allowing states to opt out of the Medicaid expansion "leaves hospitals in states that fail to expand with the responsibility to fund the coverage expansion happening nationally without the offsetting revenues created by newly eligible Medicaid patients."
