News Release

As States Prepare to Resume Disenrollments, Medicaid/CHIP Enrollment Will Reach Nearly 95 million in March, and the Pandemic-Era Enrollment Growth of 23 million Accounts for 1 in 4 Enrollees

Published: Mar 2, 2023

A new KFF analysis estimates that enrollment in Medicaid and the Children’s Health Insurance Program (CHIP) will have grown by 23.3 million enrollees, to nearly 95 million, by the end of March. That is when the federal continuous enrollment provision expires, and states can resume disenrollments, which have been paused since February 2020. Millions of beneficiaries are expected to be disenrolled over the next year, and the new estimates illustrate the extent to which enrollment could decline and who will be most affected.

Over half of the 23.3 million enrollment increase is among low-income adults under age 65 (56%), and nearly one-third is among children. According to the KFF estimates, the increase in low-income adults includes 8.9 million (38%) in the Affordable Care Act (ACA) Medicaid expansion group and 5.8 million (25%) other adults (mostly low-income parents) who do not qualify for Medicaid based on disability. Estimated enrollment increases have been smaller for adults eligible based on disability or age (1.3 million) and for CHIP enrollees (0.2 million).

It is expected that the groups that experienced the most growth due to the continuous enrollment provision—ACA expansion adults, other adults, and children—will see the largest enrollment declines.

The increase in enrollment is concentrated in a small number of states with large populations and, consequently, large Medicaid programs. Our analysis shows that California, New York, Texas, Florida, and Illinois account for over one-third of the increase in Medicaid/CHIP enrollment. Because Texas and Florida have not adopted the ACA Medicaid expansion, children and other adults account for higher percentages of enrollment gains in those states.

Growth rates in Medicaid/CHIP enrollment vary considerably by state, ranging from 22 percent in Connecticut to 81 percent in Oklahoma. States that implemented Medicaid expansion after 2020 (Oklahoma, Missouri, Nebraska, Utah, and Idaho) have particularly high enrollment growth.

The number and share of individuals who will be disenrolled across states is expected to vary, but studies estimate that between 5 percent and 17 percent of current enrollees might lose Medicaid coverage. (A previous KFF analysis estimates that between 5.3 million and 14.2 million people will lose Medicaid coverage during the unwinding of the continuous enrollment provision.)

As states start to resume renewal procedures for all current Medicaid enrollees, there is substantial uncertainty as to how much of the Medicaid enrollment growth during the pandemic will be sustained, how many people will transition to other coverage, and how many people could end up uninsured. Our recent analysis of coverage outcomes after disenrolling from Medicaid or CHIP found that nearly two-thirds of people experienced a period of uninsurance. Policies to smooth the transition from Medicaid to other coverage sources could reduce that rate as the Medicaid continuous enrollment period unwinds.

The analysis uses a combination of enrollment data from the Centers for Medicare and Medicaid Services (CMS) Performance Indicator Project (PI data), Medicaid claims data (T-MSIS data), and some state-specific data. (A detailed explanation of the methods is available in the paper.) While our estimates are based on the best available public data on states’ Medicaid and CHIP enrollment, they will likely differ somewhat from data maintained by individual states because we use modeling and assumptions to project enrollment through March 2023 and to allocate states’ adult enrollment across eligibility groups.

Medicaid Enrollment Growth: Estimates by State and Eligibility Group Show Who may be at Risk as Continuous Enrollment Ends

Authors: Alice Burns, Elizabeth Williams, Bradley Corallo, and Robin Rudowitz
Published: Mar 2, 2023

In the Consolidated Appropriations Act, 2023, signed into law at the end of 2022, Congress set an end to the Medicaid continuous enrollment provision on March 31, 2023 and phased down the enhanced federal Medicaid matching funds through December 2023. At the start of the pandemic, Congress enacted the Families First Coronavirus Response Act, which included a requirement that Medicaid programs keep people continuously enrolled during the COVID-19 public health emergency in exchange for enhanced federal funding. As a result, enrollment in Medicaid and the Children’s Health Insurance Program (CHIP) has grown substantially compared to before the pandemic, contributing to declines in the uninsured rate which dropped to the lowest level on record in early 2022. But, millions of people could lose coverage when the continuous enrollment provision ends, reversing recent gains in coverage.

This analysis estimates Medicaid enrollment growth by state and eligibility group between February 2020, before the pandemic, and March 31, 2023, at the end of the continuous eligibility period. These estimates can help paint a picture of the overall number and composition of enrollees who may risk coverage loss after the continuous enrollment provision ends. Prior to the continuous enrollment period, typical patterns of enrollment included disenrollments throughout the year. Some enrollees disenroll and then re-enroll within a short period of time (or “churn” in and out of Medicaid). The continuous enrollment provision halted disenrollment and churn, resulting in overall program growth. While states will need to conduct renewals for all enrollees, understanding the overall growth in enrollment and the composition of that growth can help inform understanding the range of potential outcomes as the continuous enrollment unwinds. How individual states implement the unwinding will affect the ultimate loss of coverage.

We use a combination of enrollment data from the Centers for Medicare and Medicaid Services (CMS) Performance Indicator Project (PI data), Medicaid claims data (T-MSIS data), and some state-specific data to inform the analysis (see Methods for a detailed explanation of the methods used in this analysis). While our estimates are based on the best available public data on states’ Medicaid and CHIP enrollment, they will likely differ somewhat from data maintained by individual states because we use modeling and assumptions to project enrollment through March 2023 and to allocate states’ adult enrollment across eligibility groups.

Distribution and Rates of Enrollment Growth By Eligibility Group

By the time the continuous enrollment period ends, we estimate that enrollment in Medicaid and CHIP will have grown by 23.3 million enrollees; nearly two-thirds of the enrollment increase is among low-income adults under age 65 (63%) and nearly one-third is among children (Figure 1, tab 1). The increase in low-income adults includes 8.9 million (38%) adults in the Affordable Care Act (ACA) Medicaid expansion group and 5.8 million (25%) other adults (mostly low-income parents) who do not qualify based on disability. Estimated enrollment increases have been smaller for adults eligible based on disability or age (1.3 million) and for CHIP enrollees (0.2 million).

Adults are experiencing the highest rates of enrollment growth during the continuous enrollment period (Figure 1, tab 2). There are very low rates of growth in CHIP, likely because the continuous enrollment provision does not apply to separate CHIP programs and some children may be moving from CHIP into Medicaid. Several factors contribute to the variation in growth rates among Medicaid eligibility groups. First, several states newly expanded Medicaid under the ACA during the continuous enrollment period resulting in high enrollment growth in those states. Adult groups and children typically experience higher rates of churn, which is when enrollees disenroll and then re-enroll within a short period of time and may occur due to temporary changes in income or administrative barriers during renewal that may result in a lapse in coverage even if an individual remains eligible for Medicaid. A recent KFF analysis found that churn rates for children more than doubled following annual renewal, signaling that many eligible children lose coverage at renewal. By halting disenrollment, the continuous enrollment provision has also halted this churning among Medicaid enrollees. People who qualify based on age or disability are historically less likely to churn on and off Medicaid as they are more likely to live on fixed income and therefore, less likely to experience changes in eligibility.

Medicaid Children, Adults Eligible through the ACA, and Other Adults Comprised the Vast Majority of New Enrollment Growth

Distribution and Rates of Enrollment Growth By State

The increase in enrollment is concentrated in a small number of states with large populations and consequently large Medicaid programs. Our analysis shows that California, New York, Texas, Florida, and Illinois account for over one-third of the increase in Medicaid/CHIP enrollment (Figure 2, tab 1). Because Texas and Florida have not adopted the ACA Medicaid expansion, children and other adults account for higher percentages of enrollment gains in those states (Appendix Table 1).  

Growth rates in Medicaid/CHIP enrollment vary considerably by state (Figure 2, tab 2). Rates range from 22% in Connecticut to 81% in Oklahoma. States that implemented Medicaid expansion after 2020 (Oklahoma, Missouri, Nebraska, Utah, and Idaho) have particularly high enrollment growth. Beyond Medicaid expansion, several factors may contribute to variation including:

  • Churn rates prior to the pandemic (states with higher rates of churn would be likely to have faster growth on account of the continuous enrollment provision),
  • The economic effects of the pandemic (in states where more people are out of work, enrollment growth may be faster), and
  • State policies to conduct outreach about coverage (states that increased outreach efforts during the pandemic are likely to experience faster growth).
Five States Comprised Over One-Third of All New Enrollment Growth

Looking Ahead to Unwinding

We estimate Medicaid/CHIP enrollment will reach nearly 95 million in March 2023, with enrollment growth since February 2020 accounting for one in four enrollees (Appendix Table 1). While the number of Medicaid enrollees who may be disenrolled during the unwinding period is highly uncertain, studies estimate that between 5% and 17% of current enrollees might be disenrolled. Earlier KFF analysis estimates that between 5.3 million and 14.2 million people will lose Medicaid coverage during the unwinding of the continuous enrollment provision. These projected coverage losses are consistent with, though a bit lower than, estimates from the Department of Health and Human Services (HHS) suggesting that as many as 15 million people will be disenrolled.

It is expected that the groups that experienced the most growth due to the continuous enrollment provision—ACA expansion adults, other adults, and children—will experience the largest enrollment declines. In states that haven't expanded Medicaid, many low-income parents and new mothers will be most at risk of losing coverage. HHS estimates that of those disenrolled, 6.8 million will likely still be eligible. Many children may remain eligible even if their parents are no longer eligible because most states’ income limits for children are considerably higher than for adults, and many adults eligible based on disability or age (65+) may remain eligible if they are living on fixed incomes.

Actual enrollment outcomes will vary across states depending on an array of state policy decisions including how states prioritize renewals and efforts to conduct outreach and enrollment assistance. These policies can help ensure that those who remain eligible for Medicaid are able to retain coverage, and that those who are no longer eligible can transition to other sources of coverage, particularly the ACA marketplace. Our state-by-state estimates of enrollment gains by eligibility group can help illustrate how many people are at risk of coverage loss (for enrollment increases by state and eligibility group see Appendix Table 1). As states start to resume renewal procedures for all current Medicaid enrollees, there is substantial uncertainty as to how much of the Medicaid enrollment growth during the pandemic will be sustained, how many people will transition to other coverage, and how many people could end up uninsured. Because a large share of people are covered by Medicaid, including an analysis that shows that over half of all children are covered by Medicaid and CHIP, declines in Medicaid coverage could directly impact the number of uninsured. Our recent analysis of coverage outcomes after disenrolling from Medicaid or CHIP found that nearly two-thirds of people experienced a period of uninsurance. Policies to smooth the transition from Medicaid to other coverage sources could reduce that rate as the Medicaid continuous enrollment period unwinds.

Appendix Table

Estimated Enrollment Growth From February 2020 to March 2023, by Eligibility Group and State

Methods

Data: This analysis uses date from the Centers for Medicare and Medicaid Services (CMS) Performance Indicator Project Data (PI data) and the T-MSIS Research Identifiable Demographic-Eligibility (T-MSIS data). We used PI data from February 2020 through August 2022 and TMSIS data from 2019, Release 1.

Overview of Approach: To estimate enrollment by state and eligibility through the end of the continuous eligibility period (March 2023), we:

  • Use PI data through August 2022 to estimate enrollment by subpopulation (Medicaid child, Medicaid adult, and CHIP),
  • Estimate growth in Medicaid through March 2023 assuming growth continues at a similar pace to last summer, and
  • Apportion enrollment among Medicaid adults to eligibility groups with T-MSIS data.

Definitions and Limitations: Our estimates are likely to be very similar to states’ PI-reported enrollment for Medicaid children, Medicaid adults, and CHP enrollees, but will differ from estimates of enrollment maintained by individual states. There are three primary reasons for these differences: the exclusion of some enrollees, the use of age-based eligibility for children, and our estimates of adult enrollment by eligibility group use a national model and our own assumptions. Specifically:

  • The PI enrollment data exclude people who are not eligible for full Medicaid coverage, such as enrollees who are only eligible for coverage of Medicare premiums, family planning services, or emergency care. Such enrollees are excluded from the enrollment totals in this analysis, resulting in lower estimates of total enrollment than in data maintained by individual states.
  • We define children as Medicaid enrollees who are grouped with children in the PI data, which are based on age rather than eligibility group.
  • We use national growth rates from a simulation model that estimates how enrollment would change under a continuous enrollment scenario for Medicaid enrollees over age 18 in all states. There is great uncertainty as to how enrollment will change over the three-year continuous enrollment period and the simulation model relied on an 11-month observation period.

We provide more detail about each step in the details below.

1. Enrollment Among Groups: The PI data provide state enrollment for all Medicaid and CHIP adults, all children (defined as anyone under the age of 19), and everyone in CHIP.

  • We removed CHIP enrollees from the Medicaid adult and child groups using T-MSIS data to estimate the percent of CHIP enrollees who are children in each state.
  • Arizona did not report separate adult and child enrollment but did report total Medicaid and CHIP enrollment. We used the 2019 T-MSIS data to apportion Arizona’s enrollment among the child and adult populations.

2. Estimated Growth Through March 2023. From step 1, we had monthly enrollment by state for Medicaid adults, Medicaid children, and all CHIP enrollees.

  • We projected growth through March 2023 at the national level for each subpopulation using growth rates from May 2022 through August 2022.
  • We allocated national enrollment to states using the enrollment distributions from August 2022 for Medicaid adults, Medicaid children, and all CHIP enrollees.

3. Apportion Adult Enrollment to Eligibility Categories. We divided Medicaid adult enrollment into eligibility groups using the T-MSIS data. We analyzed these eligibility groups separately because enrollment patterns of adults eligible based on age or disability are different from those of other adults.

  • We used the T-MSIS data from 2019 to estimate the eligibility group distribution for of adult Medicaid enrollees in each state as of February 2020.
  • We used a simulation model with T-MSIS data to estimate enrollment growth by eligibility group in 2019 under a scenario in which enrollees were not disenrolled unless they died or moved out of state. This model is similar to our earlier analyses of enrollment during continuous enrollment period, but differs in that earlier analyses did not match the PI data and did include enrollees who were eligible for partial benefits.
      • We restricted the analysis to adults ages 19 and older who were eligible for full Medicaid benefits and deduplicated enrollees with multiple periods of enrollment in 2019.
      • We identified deaths and inter-state moves in the Demographic-Eligibility file.
      • We conducted a sensitivity analysis with 2018 T-MSIS data and found similar results.
  • We used the outputs from the simulation model to estimate the growth rates for each adult eligibility group during the continuous enrollment period and then scaled those eligibility-group specific growth rates so that the weighted average of groups’ rates equaled the growth rates we observed in the PI data.
  • We projected eligibility-group enrollment among adults using the scaled growth rates and calibrated the totals so that total adult enrollment continued to equal the enrollment states reported in the PI data.
  • We used the projected enrollment by adult eligibility groups to estimate how the composition of adult Medicaid enrollees changed during the continuous enrollment period. We applied the changes in the distribution of adult enrollees to each state’s adult enrollment distribution from 2019.
  • We assumed the major distributional changes occurred between February 2020 and September 2022, that distribution changes slowed during FY 2022, and that by FY 2023, enrollment growth was similar among all eligibility groups.
  • The T-MSIS data did not include adults in the ACA group for Virginia which expanded Medicaid in 2019 or for states that expanded Medicaid after 2019: Idaho (2020), Missouri (2022), Nebraska (2020), and Oklahoma (2022). For those states, we used publicly available data to estimate the percentage of adults enrolled in ACA coverage and adjusted enrollment in the other groups proportionally.
News Release

As Debate Heats Up in Washington Over Possible Entitlement Cuts, A New KFF Analysis Details the 30% of Federal Spending That Goes to Health Care Programs

Published: Mar 1, 2023

As some policymakers in Washington are pushing to reduce the federal deficit and debt, a new KFF resource provides a concise explanation of federal spending for domestic and global health programs and services, which could be part of any conversation about curbing federal spending.

Federal spending on health programs and services accounted for 30 percent of net federal spending in fiscal year 2022 — or $1.7 trillion out of a total of $5.9 trillion. Specifically, Medicare accounted for 13 percent of the total, Medicaid and CHIP accounted for 10 percent, other domestic health spending accounted for 5 percent, hospital and medical care for veterans was 2 percent, and global health was 0.1 percent. (By comparison, Social Security accounted for 21 percent of net federal spending that year, while defense accounted for 13 percent.)

The large majority of federal health spending (86%, or $1.5 trillion) is mandatory spending that is not subject to annual appropriations votes by Congress. This includes nearly all Medicare spending, federal spending on Medicaid and CHIP (which are jointly funded by states and the federal government), and part of the money devoted to premium tax credits for coverage through the ACA Marketplaces, among other categories of spending.  Medicare accounts for half of mandatory spending on federal health programs and services, while Medicaid accounts for another 37 percent.

The federal government also provides several tax benefits that support health-related activities, known as tax expenditures because they result in lower federal tax revenues.

Some Republican lawmakers have pushed for reductions in future federal spending as part of a deal to raise the debt limit. The Biden Administration has said it will not negotiate spending reductions as part of debt limit talks but is open to separate discussions about approaches to debt and deficit reduction.

Members of both major political parties have indicated that cuts to Social Security and Medicare are “off the table” in these discussions, leaving open the question of whether Medicaid, the ACA’s premium tax credits, and possibly other health programs and services could be targeted for spending reductions.

Our FAQs answer basic questions about health spending and the federal budget and budget enforcement tools, including the debt limit and sequestration. We include detailed explanations and charts about what counts as mandatory spending and what falls into the category of discretionary spending. The debt limit itself does not directly affect levels of spending by the federal government, including mandatory and discretionary health spending.

News Release

New Data Show Increased Outreach to 988 Following Implementation of the Number for the National Suicide Prevention and Crisis Hotline

National 988 Answer Rates Were at 91% But There was Considerable Variation in “In-State” Answer Rates

Published: Feb 28, 2023

A KFF analysis finds that outreach to the new 988 number for the national suicide prevention and crisis hotline increased after its implementation in mid-July, then steadied until December 2022, when it rose again. Text volume increased more than 700 percent compared to the year prior but remains a smaller share of overall outreach.

Since the launch of 988, Lifeline has received over 2.1 million contacts—consisting of over 1.43 million calls, over 416,000 chats, and more than 281,000 texts.

The easy-to-remember three-digit number steers callers who are suicidal or experiencing a behavioral health crisis to the renamed 988 Suicide & Crisis Lifeline, where they can be connected to a local Lifeline counselor and may receive crisis counseling, resources, and referrals. Before 988, the Lifeline crisis hotline–established in 2005–was typically accessed through a 10-digit number, which was difficult for callers experiencing a mental health crisis to recall.

The analysis shows that nationally, about 10 percent of calls are transferred to out-of-state overflow facilities and 11 percent are abandoned by the caller. However, the 988 in-state answer rate varies widely across states. In December 2022, in-state answer rates ranged from a low of 51 percent to 69 percent in seven states to a high of 90 percent to 98 percent in 13 states.

As states debate their FY 2024 budgets, long-term funding of local 988 crisis call centers may become an issue. Although the federal government spent money to assist with the implementation of 988, ongoing funding relies heavily on local and state funds. To date, five states have chosen to enact legislation for 988 telecommunication fees that could provide ongoing funding for local crisis call centers. Longer term, additional state and national crisis center metrics related to the referral source, reason, outcome and user experience of using 988 may help inform the 988 implementation and future program improvements.

News Release

Medicare Advantage Insurers Report Much Higher Gross Margins Per Enrollee Than Insurers in Other Markets

Published: Feb 28, 2023

A new analysis of health insurers’ 2021 financial data shows that insurers continue to report much higher gross margins per enrollee in the Medicare Advantage market than in other health insurance markets.

The analysis examines insurers’ financial data in the Medicare Advantage, Medicaid managed care, individual (non-group), and fully insured group (employer) markets.

In 2021, Medicare Advantage insurers reported gross margins averaging $1,730 per enrollee, at least double the margins reported by insurers in the individual/non-group market ($745), the fully insured group/employer market ($689), and the Medicaid managed care market ($768).

For Medicare Advantage insurers, the gross margins per enrollee in 2021 were similar to the period before the COVID-19 pandemic. Margins per enrollee for the individual and group markets in 2021 were below pre-pandemic levels, while the margins per enrollee for Medicaid managed care insurers are higher.

The high margins per member for Medicare Advantage insurers occur following years of rapid growth in the market, with more than half of eligible beneficiaries expected to enroll in Medicare Advantage plans this year.

The analysis also examines the percentage of premium income that insurers pay out in claims, also called the medical-loss ratio, and finds insurers across the four markets reported similar medical-loss ratios in 2021.

“Health Insurer Financial Performance in 2021” is available online.

Outpatient Visits Are Growing More Complex: Implications for Health Costs

Authors: Hope Schwartz, Gary Claxton, Matthew Rae, Krutika Amin, and Cynthia Cox
Published: Feb 27, 2023

The cost of an outpatient visit to a physician’s office, urgent care, or emergency department, depends in part on the level of service provided. This analysis uses claims data from private, large employer-based plan to examine trends in complexity coding across outpatient practice settings from 2004 to 2021.

Over the 18-year period, claims for evaluation and management services trended towards higher complexity codes, even among specific, common diagnoses like urinary tract infections and headaches. These changes are contributing to higher outpatient health spending. In 2021, outpatient evaluation and management spending would be 4% lower in both physician offices and emergency departments than actual 2021 spending, if visits were coded at the same levels as is 2011.

The analysis is available through the Peterson-KFF Health System Tracker, an online information hub that monitors and assesses the performance of the U.S. health system.

2022 Women’s Health Survey

The 2022 KFF Women’s Health Survey (WHS) is part of a series of nationally representative surveys on women’s health conducted by KFF periodically since 2001. The survey’s objective is to better understand women’s experiences with contraception, access to health care, and other issues related to health and well-being. The 2022 survey includes 6,442 people ages 18 to 64, including 5,201 females (self-reported sex at birth) and 1,241 males, and was conducted from May 10, 2022, to June 7, 2022. The briefs and reports presented here explore women’s experiences, preferences, and coverage for contraception, preferences for an over-the-counter contraceptive pill, workplace benefits and family care responsibilities, access and affordability of care, and more.

On December 13, 2022, KFF held a web event highlighting key findings from KFF’s 2022 Women’s Health Survey on women’s contraceptive access, experiences, and preferences. After the presentation of the survey findings, leaders in sexual and reproductive health care explored the challenges and opportunities in contraceptive care access in a rapidly changing policy and clinical context.

contraception

Access and experiences

COST & COVERAGE

workplace and family

LGBT+ Access & experiences

News Release

Rural Hospitals Have Fared Worse Financially in States that Haven’t Expanded Medicaid Coverage

Published: Feb 23, 2023

Rural hospitals fared worse financially in states that have not expanded their Medicaid programs under the Affordable Care Act than in states that expanded Medicaid, a new KFF analysis finds.

Nearly one third of all rural hospitals nationally are in the 11 states that have not approved the expansion of their Medicaid programs to cover low-income childless adults, and concerns about their ongoing viability has been an issue in legislative debates about whether to do so.

The analysis reveals that the median operating margin for rural hospitals has been consistently higher in states that have expanded their Medicaid programs than in non-expansion states from July 2017 through June 2022, although the financial stability of individual rural hospitals varies widely.

For the most recent period, from July 2021 through June 2022, the median operating margins for rural hospitals in states that have not expanded their Medicaid programs was 2.2%, compared to 3.9% in expansion states, based on the 438 hospitals analyzed.

If not for federal COVID-19 relief funds, rural hospitals would be facing even more challenging times as their finances have worsened, with median operating margins dipping to 1.2% in expansion states and -0.7% in non-expansion states when subtracting out documented relief funds.

Based on an analysis of hospital cost reports, Rural Hospitals Face Renewed Financial Challenges, Especially in States That Have Not Expanded Medicaid is part of KFF’s expanding work examining the business practices of hospitals and other providers and their impact on costs and affordability.

 

Rural Hospitals Face Renewed Financial Challenges, Especially in States That Have Not Expanded Medicaid

Published: Feb 23, 2023

Policymakers have had ongoing concerns about the financial health of rural hospitals and the implications  for access to care and the local economy. Rural hospital finances improved during the COVID-19 pandemic as a result of government relief funds. However, industry reports suggest that the outlook for the hospital sector as a whole deteriorated in 2022 as these funds have gone away and due to ongoing effects of the pandemic (such as labor shortages), rising prices, and investment losses. Concerns about the viability of rural hospitals have been cited as one factor that could potentially motivate lawmakers to expand Medicaid in the eleven states that have not already done so. These non-expansion states collectively account for about one-third (34%) of rural hospitals, based on our analysis of 2021 hospital cost report data.

In this data note, we provide a background on rural hospital finances and use hospital cost report data to describe operating margins among rural hospitals before and during the COVID-19 pandemic (see Methods for details). We find that median operating margins among the rural hospitals in our analysis increased earlier in the COVID-19 pandemic, likely as a result of government relief funds, but that these facilities face renewed financial challenges, especially in states that have not expanded Medicaid (Figure 1). Among rural hospitals in non-expansion states, median operating margins were 2.1 percent during the July 2021-June 2022 period and were -0.7 percent when excluding documented relief funds. In Medicaid expansion states, median operating margins dropped, but remained positive even after excluding documented relief funds.

Median operating margins among the rural hospitals in our analysis increased earlier in the COVID-19 pandemic, likely as a result of government relief funds, but have since decreased substantially

Rural hospital finances leading into the pandemic

Rural hospitals have faced unique financial challenges that precede the COVID-19 pandemic. Among other challenges, rural hospitals tend to have low patient volumes—given that they serve small populations and residents increasingly travel to urban facilities to receive their care—which may lead to higher costs on average and may limit the ability of rural facilities to offer specialized services. From 2010 to 2019, 114 rural hospitals eliminated inpatient services or closed altogether, while others eliminated specific service lines, such as obstetric units. According to our analysis, in 2019, the year before the beginning of the COVID-19 pandemic, median operating margins were 1.5% among rural hospitals, compared to more than three-times that rate (5.2%) among other hospitals (data not shown).

Although rural hospitals face a common set of challenges, operating margins varied substantially across facilities. For example, we found that about two-fifths (41%) of rural hospitals had negative operating margins in 2019, though about one-third (32%) had operating margins at or above 5.0% in the same year (data not shown). One previous study found that median margins on patient care are greater among large versus small rural hospitals, though another analysis found that closures were less likely among Critical Access Hospitals (rural facilities that are eligible for cost-based reimbursement from Medicare on the basis of having 25 or fewer acute inpatient beds and either meeting distance requirements from the nearest hospital or being deemed a necessary provider by the state prior to 2006). The latter study also found that closures were more likely among for-profit hospitals, Medicare Dependent Hospitals (rural facilities that are eligible for greater Medicare reimbursement on the basis of having high Medicare inpatient shares and 100 or fewer beds), hospitals in the South, and hospitals in states that have not expanded Medicaid.

Median operating margins among rural hospitals were higher in expansion than non-expansion states in 2019 (2.0% versus 0.3%) based on our analysis (data not shown), which is consistent with research suggesting that expanding Medicaid has improved the financial performance of hospitals. The Affordable Care Act (ACA) expanded Medicaid coverage for most low-income adults to 138% of the federal poverty level, though a June 2012 Supreme Court decision effectively allowed states to decide whether to adopt the Medicaid expansion. Currently, eleven states have not expanded Medicaid, and they are largely in the South. Previous research has found that Medicaid expansion has resulted in decreases in uncompensated care, increases in operating margins, and decreases in closures of hospitals and obstetric units. Medicaid expansion improves hospital finances by extending coverage to uninsured patients who would otherwise qualify for hospital charity care or be unable to pay their bills. Among studies that have evaluated the effect of Medicaid expansion on urban and rural hospitals separately, most reported that improvements in financial performance have been concentrated among rural hospitals. Although research suggests that expanding Medicaid has improved the financial performance of rural hospitals, it may not be a panacea. For instance, while median operating margins among rural hospitals were higher in expansion than non-expansion states in 2019 (2.0% versus 0.3%), they were still lower than median operating margins among non-rural hospitals in expansion states (4.2%) (data not shown).

The financial performance of rural hospitals improved substantially early in the pandemic, likely as a result of government relief funds. Median operating margin among rural hospitals increased from 1.0% during July 2017-June 2019 to 7.7% during July 2019-June 2021 based on our analysis of a subset of hospitals (see Methods for details). Rural hospital closures had been increasing since 2017 before peaking at 19 closures in 2020 (the largest number since at least 2005) and then dropping to 2 closures in 2021 (the smallest number since at least 2005).

The large improvement in the financial performance of rural hospitals likely reflects the receipt of government relief funds, including dollars that were targeted specifically towards rural hospitals. Subtracting out relief funds documented in hospital cost reports lowers median operating margins during July 2019-June 2021 from 7.7% to 3.9%, according to our analysis. It appears that some hospitals did not separately or completely report relief funds, meaning that our estimates may overstate what operating margins would have been in the absence of relief funds, and potentially substantially so. In other words, relief funds likely played an even more substantial role in supporting rural hospital operating margins than suggested by our analysis.

Rural hospitals now face renewed financial challenges. After increasing substantially earlier in pandemic, median operating margins among the rural hospitals in our analysis fell from 7.7% in July 2019-June 2022 to 3.3% in the July 2021-June 2022 period. When subtracting out relief funds documented in hospital cost reports, median operating margins were slightly lower than pre-pandemic levels during the July 2021-June 2022 period and would likely have been even lower if accounting for relief funds that were not specifically documented by hospitals. Industry reports suggest that the outlook for hospitals and health systems deteriorated in 2022, which is only partially reflected in our analysis of July 2021-June 2022 data. In this context, it is not clear whether hospital closures may reemerge as an issue facing rural communities. There were seven hospital closures in 2022, which was greater than the number in 2021 (2 closures), but still less than the average number from 2005-2022 (10.3).

Median operating margins among rural hospitals were lower in non-expansion states than in expansion states in each period of our analysis, leaving these facilities in weaker financial standing to confront the challenges that have faced the hospital sector in recent months. For example, during the July 2021-June 2022 period, median operating margins among rural hospitals in our analysis fell to 2.1% in non-expansion states (compared to 3.9% in expansion states) and -0.7% when subtracting out documented relief funds (compared to 1.2% in expansion states).

Looking ahead

There may be additional challenges for rural hospitals on the horizon. First, key sources of COVID-19 relief have been largely depleted. This includes Phase 4 Provider Relief Funds—which were intended to be greater for smaller providers—and American Rescue Plan (ARP) rural funds, both of which may have helped sustain rural hospitals during July 2021-June 2022. Second on March 31, 2023, a provision will end that has required states to keep people in Medicaid continually enrolled during the pandemic in exchange for enhanced federal matching funds. A KFF analysis estimated that between 5 and 14 million people could lose Medicaid enrollment as a result, which may increase uncompensated care costs for rural and other hospitals. Finally, the Biden administration has announced plans to end COVID-19 emergency declarations on May 11, 2023. This would eliminate numerous health care policies and regulations that could have implications for hospital finances, such as a 20 percent increase in the Medicare payment rate for hospitalized patients who are diagnosed with COVID-19.

Policymakers have implemented a number of initiatives that are intended to support rural hospitals or restructure the rural health care delivery system. For example, in December 2022, Congress passed an omnibus spending bill that included a two-year extension of Medicare payment adjustments targeted towards rural hospitals. The federal government also recently implemented a new payment model, the Rural Emergency Hospital designation, which provides additional resources intended to sustain emergency and outpatient services at facilities that may no longer be able to support inpatient care. Finally, the Center for Medicare & Medicaid Innovation (CMMI) is testing the Pennsylvania Rural Health Model which provides rural hospitals with an all-payer global budget and is intended to reduce costs, increase quality, and improve the sustainability of rural hospital finances.

It is unclear whether current policy initiatives will be sufficient to sustain access to care in rural areas, especially in states that have not expanded Medicaid, where hospitals are facing greater financial challenges.

Methods

Our analysis is based on RAND Hospital Data, which is a cleaned and processed version of annual cost report data submitted by hospitals to the Healthcare Cost Report Information System (HCRIS). Every Medicare-certified hospital must submit a cost report, meaning that HCRIS data encompass all US hospitals except federal hospitals and some children’s hospitals. We conducted additional data cleaning, assigned cost report data to years based on the reporting period end date (which varies across facilities), and focused on short-term general and/or critical access hospitals. We identified rural areas based on a definition from the Federal Office of Rural Health Policy, which the Health Resources & Services Administration (HRSA) uses to determine eligibility for Rural Health Grants.

Operating margins reflect the profit margins earned on patient care and other operations of a given hospital, such as from gift shops, parking, and cafeterias. They are calculated by dividing the difference between operating revenues and expenses (also known as “net operating income”) by operating revenues. We excluded investment income and charitable contributions from operating revenues but included government appropriations, which may be critical for sustaining the operations of some hospitals.

We defined expansion and non-expansion states differently based on the period of analysis. When analyzing 2019 data, we defined expansion states to include all states that had expanded Medicaid through that year (including Virginia, which did so on January 1, and Maine, which did so on January 10, with coverage retroactive to July 2, 2018). We defined all remaining states as non-expansion states, except for Wisconsin, which covers individuals up to 100 percent of the federal poverty level and therefore does not have a coverage gap. We began with the same set of states when analyzing July 2017-June 2022 data but excluded seven states that expanded during that period (Idaho, Maine, Missouri, Nebraska, Oklahoma, Utah, and Virginia). All analyses included South Dakota as a non-expansion state, given that it expanded Medicaid after our period of analysis.

Our analysis of 2019 data included 2,117 rural hospitals and 2,179 urban hospitals and our analysis of trends included 527 rural hospitals, i.e., 25% of all rural hospitals with 2019 data. When evaluating operating margins by expansion status, we excluded hospitals from some states (as described above), leaving 2019 data for 1,201 and 845 hospitals from expansion and non-expansion states, respectively, and trend data for 305 and 133 hospitals, respectively. For our trend analysis, we focused on rural hospitals with July to June reporting periods, given that this was the second-most common reporting period and, as of February 2023, RAND Hospital Data from 2022 were rarely available for the most common reporting period (January to December).  We also focused on hospitals with complete data from June 2017-June 2022. We found similar patterns (but different operating margins) when evaluating the much larger group of hospitals with complete 2018-2021 data (1,938 facilities or about 92% of all rural hospitals with 2019 data). Among those hospitals, operating margins increased from 1.2% in 2018-2019 to 7.7% in 2020-2021 (or 2.4% when excluding documented relief funds).  Among the hospitals in our trend analysis, operating margins increased from 1.0% in 2018-2019 to 7.7% in 2020-2021 (or 3.9% when excluding documented relief funds). Median operating margins were also higher among hospitals in expansion versus non-expansion states during the 2018-2019 and 2020-2021 periods when evaluating the larger group of hospitals with complete 2018-2021 data. The magnitude of this difference during the 2020-2021 period was smaller overall (8.3% among expansion states versus 6.5% among non-expansion states compared to 8.5% versus 5.6% in our trend analysis) but larger after removing documented relief funds (3.5% versus 0.0% compared to 4.9% versus 2.6% in our trend analysis).

This work was supported in part by Arnold Ventures. KFF maintains full editorial control over all of its policy analysis, polling, and journalism activities.

News Release

New KFF Trackers Document State and Federal Reproductive Rights Litigation Across the Country

Published: Feb 23, 2023

KFF has created two new trackers to follow swift-moving reproductive rights litigation in the state and federal courts. The tools, which are currently tracking the status of 21 state cases in 15 states and eight federal cases, will be updated regularly as the litigation proceeds.

Major cases pending in federal and state courts could impact access to abortion and contraceptive care for millions across the US. In fact, a federal district court is considering a case that holds the future of medication abortion nationwide in the balance and the Department of Health and Human Services has appealed a case that has blocked contraceptive access without parental consent for teens in Texas. In addition, abortion bans in 14 states have been challenged in 20 ongoing cases in state courts.

Use the state tracker to follow the progression of each state case in the context of whether state abortion bans are in effect. Explore the federal tracker to keep up with litigation in federal courts that involves access to contraception and abortion, including the federal regulations or policies being challenged and the bases for the challenges.