The Affordable Care Act’s coverage expansions have benefited hospitals financially, helping to produce an overall decline nationwide in uncompensated care from $34.9 billion to $28.9 billion in 2014, according to a new analysis by the Kaiser Family Foundation. Nearly all of the decline occurred in Medicaid expansion states, where uncompensated care costs were $10.8 billion in 2014 – down $5.7 billion, or 35 percent, from 2013, the year before ACA coverage expansions took full effect.
The analysis of Medicaid hospital payments, based on both financial data and stakeholder interviews, explains Medicaid payment rates and notes that hospitals expect some of the financial gains associated with declining uncompensated care to be offset by a higher volume of Medicaid payments that may be lower than hospital costs. Current data is not reliable enough to assess the extent to which this has occurred or the variation across states and individual hospitals.
Additionally, many hospitals and hospital associations are concerned that the increase in patient revenue under the ACA will not fully offset the reduction in federal Medicaid disproportionate share hospital (DSH) payments. The ACA calls for DSH allotments, which totaled $11.7 billion in 2014, to decrease by $2 billion in fiscal year 2018 and fall by a total of $43 billion between 2018 and 2025. Safety net hospitals are particularly at risk because of their high dependence on Medicaid DSH funds, high numbers of uninsured patients, few privately-insured or Medicare patients, and generally weaker financial condition. Hospitals’ ability to use Medicaid supplemental payments in addition to DSH may also be limited in the future.