Uncompensated Hospital Care to Plummet $5.7B Due to ACA; States Expanding Medicaid Benefit Most

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Managed care has an answer to what happens when previously uninsured patients suddenly gain coverage: the cost of uncompensated care falls substantially, and so do the numbers of patients showing up at hospitals and emergency rooms without insurance.

One of the unknowns in managed care has been how much hospitals could save if those who previously landed in the emergency room without insurance could suddenly pay, thanks to Medicaid expansion.

The early answer? A lot. In 2014, uncompensated hospital care is on track to exceed $5.7 billion, with 74 percent of that total coming from states that expanded Medicaid by the end of the second quarter (Pennsylvania and New Hampshire have since joined the ranks). Twenty-seven states and the District of Columbia have now expanded Medicaid.

News on this change came in a report yesterday from the HHS, which touted the difference that expanding Medicaid will make for hospitals in those states.

“Hospitals have long been on the front lines of caring for the uninsured, who often cannot pay the full costs of their care,” HHS Secretary M. Sylvia Burwell said in a statement. “Today’s news is good for families, businesses, and taxpayers alike. It’s yet another example of how the Affordable Care Act is working in terms of affordability, access, and quality.”


The report says the changing mix of who is insured is beginning to affect how hospitals and emergency rooms are used, noting:

  • Numbers of hospital admissions among patients who are uninsured or self-pay have fallen substantially
  • Numbers of patients who are uninsured or self-pay in emergency rooms have also fallen substantially
  • Hospital admissions for patients with Medicaid have increased, but only in states that have expanded the program.

The report may cast more light on the divide that is emerging between “haves” and “have nots” in healthcare; hospitals in states that have not expanded Medicaid can be expected to renew calls for change. Uncompensated care is recognized as a huge stumbling block to transparency in healthcare billing, as hospitals seek to cover costs for patients who must be treated but have no insurance or income. Managed care has long identified the issue of uncompensated care as one that impedes efficiencies and causes decisions to be made with reimbursement in mind.

Medicaid expansion under the Affordable Care Act (ACA) aimed to fix this problem. As passed by the Congress, the law called for states to expand Medicaid to individuals with family incomes at or below 133 percent of the federal poverty level (generally $31,322 for a family of 4 in 2013). The expansion includes non-elderly adults without children, who have previously been ineligible for coverage in most states. The federal government absorbs the costs of expansion through 2017 and continues to pay most of the costs after that.

In ruling to uphold the ACA, the US Supreme Court allowed states to decide on their own whether to expand Medicaid; in some states, especially in the South, governors and legislatures have declined to extend healthcare to those who would be eligible, arguing that future costs to states are unknown and the federal share of payment could change. However, because the law assumed all states would expand Medicaid, other financial provisions in ACA altered uncompensated care compensation, putting some hospitals in peril.

The report from HHS comes amid other reviews of the ACA, including one published today in The American Journal of Accountable Care. In their discussion on how healthcare reform is working for consumers, Dr Patricia Salber and Christobel Selecky report that thus far, the law is working better than expected from a consumer standpoint, but the results are uneven based on whether a previously uninsured person lives in a state that has expanded Medicaid.

“So far at least, healthcare reform appears to be meeting or even exceeding expectations from a consumer standpoint,” Dr. Salber said. “But much remains to be seen. It’s too early to tell whether healthcare reform will change long-term patterns, such as getting more people to use primary care doctors instead of the emergency room. And we won’t know for a while if the law will result in better health.”

Dr. Salber and Selecky gather data from multiple independent sources for their review, which looks at just who the new consumers of healthcare are and what their experiences have been, at least so far. For the full article, click here. Among their findings:

  • The drop in the uninsured population is meaningful, and 4 out of 5 newly insured consumers believe having coverage will improve their ability to get care (Commonwealth Fund).
  • The benefits of the ACA are widespread, but unevenly felt across the country.
  • People are, for the most part, satisfied with their plans.
  • Six of 10 adults said they had used their coverage by June, and a majority said they would not have been able to access care beforehand.

Published by The American Journal of Managed Care and launched in December 2013, The American Journal of Accountable Care is devoted to research and commentary about healthcare reform, especially new payment models that reward value over fee-for-service.

Around the Web

HHS Report on Uncompensated Care in Hospitals

Update on the Impact of the Affordable Care Act on Consumers