A February study released by the Foundation for Government Accountability (FGA) lays waste to the claims by Medicaid expansion advocates that expansion would translate into an economic boon for state hospitals.
Key findings suggest that not only did the economic benefits predicted by advocates not materialize in expansion states, in some cases the very opposite occurred.
Specifically, the study found:
- Medicaid expansion did not strengthen the financial condition of struggling hospitals
- Expansion not only did not “create jobs,” but non-expansion states added hospital jobs at a higher rate than expansion states
- The number of expansion enrollees coming from the ranks of the privately insured exceeded expectations and put financial strain on hospitals
Medicaid expansion not a financial silver bullet for hospitals
For years, supporters have insisted that Medicaid expansion will boost the bottom line of struggling hospitals – especially rural hospitals. They cite figures showing that the majority of rural hospital closures over the last several years have occurred in non-expansion states; a claim that proves to be mere correlation and not causation when examined more carefully.
Furthermore, FGA cited “an analysis of six full years of hospital financial data and more than 1,700 hospitals, comparing non-expansion states to expansion states,” which concluded “expansion was found to be associated with ‘higher Medicaid payment shortfalls,’” so much so that expansion’s net financial impact on hospitals was “close to zero.”
In short, any financial boost to hospitals from reducing uncompensated care by moving people from the uninsured to Medicaid was offset by patients moving from private insurance coverage to Medicaid and its significantly lower reimbursement rates.
The FGA study noted “These findings are consistent with earlier studies by Moody’s Investor Service, the firm that issues the credit ratings for hospitals nationwide.”
Moody’s “analysis of hospitals’ own financial data found that there was ‘no significant difference’ in improved financial status in expansion states as compared to states that rejected Obamacare expansion.”
The bottom line: Medicaid expansion failed to materially improve hospitals’ financial condition.
This should be especially concerning to North Carolina Medicaid expansion advocates because the state’s share of expansion costs will mostly be paid for by a tax on hospitals.
Medicaid expansion did not create jobs
In contrast to one of the loudest claims made by Medicaid advocates, that expansion will create thousands of jobs, FGA also found “nearly 40 percent of Obamacare expansion states lost hospital jobs in the first year of the program.”
For instance, Arkansas hospitals lost 732 jobs in the first year of their expansion. In Iowa, hospitals shed more than 1,000 jobs after one year of expansion, and “researchers at the University of Louisville found that Kentucky actually lost more than 1,200 health care and related jobs in the first year of expansion,” FGA reported.
The FGA study showed that “In total, 11 states and the District of Columbia lost hospital jobs in their first year of Obamacare expansion—including later expanding states Louisiana and Michigan.”
Indeed, the study also found “hospital job growth has actually been more rapid in states that rejected this failed welfare expansion.”
Their research discovered “Over a period of nearly five years, non-expansion states enjoyed annual hospital job growth of 1.55 percent on average, compared to just 1.36 percent for Obamacare expansion states.”
Medicaid expansion drew many of its enrollees from the ranks of the privately insured, causing economic distress on hospitals
Medicaid expansion advocates continue to claim that expansion will boost the finances of hospitals because it will shift significant numbers of patients from being uninsured to being covered by Medicaid. This would lessen the amount of uncompensated care provided by hospitals, providing much needed financial relief, the story goes.
But what if that financial relief is offset by a shift in patients moving from private insurance to Medicaid?
Because Medicaid reimburses hospitals at only about 63 percent of the rate private insurers do, this shift would represent a significant blow to the bottom line of hospitals. In fact, Medicaid reimbursements have been found to be below hospitals’ cost of care.
A December 2019 FGA report found that “if the remaining non-expansion states expand Obamacare, they could drive more than two million additional Americans out of private insurance plans and into Medicaid.”
Indeed, states that have already expanded Medicaid are experiencing major influxes of previously privately insured patients enrolling in the government program.
For example, in Montana, 72 percent of those enrolled in Obamacare exchange coverage who also met Medicaid expansion income requirements dropped their private exchange coverage. It’s easy to conclude most shifted to Medicaid. Similarly, Louisiana saw an 80 percent drop in exchange coverage for that income group. Thousands more on other private insurance also shifted onto Medicaid.
As a result, Montana’s Medicaid enrollment surged by double initial projections, and Louisiana’s grew by 50 percent more than expected.
The FGA report further noted that in Colorado, “hospitals’ operating losses for treating Medicaid patients have tripled since expanding Obamacare, growing to nearly $1 billion by 2017.” This increase has more than offset the reduction in charity care.
The Obamacare law includes a mandate that “individuals who become eligible for Medicaid expansion will automatically lose access to federal premium subsidies,” according to FGA.
This requirement essentially forces low-income people off of the private insurance coverage they obtained through the exchange and onto Medicaid. The result of this shift is significant financial losses for hospitals.
Conclusion
If something sounds too good to be true, it probably is. Such is the case with Medicaid expansion. Advocates claim it will save lives, save hospitals and create jobs – all with no downside or trade-offs.
Sober analysis, however, shows this not to be the case. Medicaid coverage does not equal access to care. The promised jobs not only didn’t materialize, but non-expansion states actually created more hospital jobs than expansion states. And research shows that expansion failed to boost the bottom line of hospitals, and in many states harmed them.
Rather than continue to lobby for greater government control over the healthcare industry, we should instead focus on undoing the government restrictions that drive up prices and restrict competition.
