Manatt on Medicaid: Early Results Point to Benefits of Expansion

Authors: Deborah Bachrach, Partner | Patricia Boozang, Managing
Director | Mindy Lipson, Senior Analyst

By the end of 2014, 27 states and the District of Columbia had expanded Medicaid eligibility to adults with incomes up to 133% of the Federal Poverty Level (FPL).¹ And, governors in Indiana, Montana, Tennessee, Utah and Wyoming had put forward proposals to implement expansion in 2015. The opportunity to extend health coverage to tens of thousands–in some states hundreds of thousands–of low-income adults² and at the same time inject billions of federal dollars into state economies are powerful motivators.

States that have expanded their Medicaid programs are seeing significant benefits for residents, providers, payers and their economies. With data still coming in, here are some early results from 2014.

Expansion Impact

To date, Medicaid expansion has had a meaningful impact on health coverage, uncompensated care costs, and state budgets.

• Approximately 8.2 million individuals have gained coverage. In the 28 states (including D.C.) that have participated in Medicaid expansion, approximately 8.2 million individuals have gained Medicaid coverage since September 2013³ –a coverage gain more than five times that of the 23 states that have not expanded, where less than 1.5 million previously eligible individuals gained Medicaid coverage.⁴ In these non-expansion states, approximately 4 million individuals fall into a “coverage gap” with incomes too high to qualify for Medicaid but too low to qualify for tax credits through the Marketplace. ⁵
• Expansion states have had the largest declines in their uninsured residents. An August Gallup poll found that the 10 states with the largest percentage point decreases in uninsured residents from 2013 to mid-2014 all expanded Medicaid. Arkansas, which had the largest decrease nationally in its uninsured population (10.1 percentage points), had the lowest Medicaid eligibility levels in the country prior to expansion. Kentucky had the second largest decrease at 8.5 percentage points.⁶
• Hospitals in expansion states have seen large decreases in uncompensated care costs. Hospitals in expansion states have seen, on average, a 46% decrease in uncompensated care costs, from a per hospital yearly average of $2.8 million to $1.5 million.⁷ Hospitals in non-expansion states experienced a far smaller decline in average costs related to caring for the uninsured and underinsured, at just 15% per hospital.⁸
  
  Four large hospital systems with facilities in both expansion and non-expansion states, Community Health Systems, HCA Hospital Corporation of America, LifePoint, and Tenet, report wide disparities between expansion and non-expansion states in terms of the volume of uninsured admissions. In 2014, these systems saw decreases in uninsured admissions ranging from 48% to 72% at facilities in expansion states. In non-expansion states, the decline in uninsured admissions was far less dramatic, ranging from 0% to 14%.⁹
  
  A number of hospital associations and research organizations have published state-specific studies highlighting reductions in uncompensated care costs.
  • Arizona: The Arizona Hospital and Healthcare Association reported that from January to April 2014, Arizona hospitals experienced a 31% decrease in uncompensated care costs as compared to the same period in 2013. Their operating margins also increased by 31%, from $140 million to $184 million.¹⁰
  • Arkansas: A study by the Arkansas Hospital Association and the Arkansas Chapter of the Healthcare Financial Management Association found that during the first six months of the Private Option, Arkansas’s approach to Medicaid expansion, hospitals’ uncompensated care losses declined by approximately 56% as compared to the first half of 2013. The percentage of hospitalizations and emergency department (ED) visits by uninsured patients decreased during this period by 47% and 36%, respectively.¹¹
  • Colorado: According to data from the Colorado Hospital Association, the average uncompensated care costs by hospital decreased by 36% from January through March 2014 when compared to the same period a year earlier.¹²
  • Iowa: In the first half of 2014, hospitals had 46% fewer discharges among uninsured patients than the same period a year prior, according to a survey by the Iowa Hospital Association. In addition, uninsured cases declined by almost 19%, translating into approximately $32.5 million in savings.¹³  
  • Ohio: Policy Matters Ohio reported that a number of Ohio hospital systems have seen the share of uninsured patients decrease since expansion. For example, from July 2013 to June 2014, at Ohio State University’s Wexner Medical Center, the share of uninsured patients decreased by 19%, and during the same time period, Mount Carmel Health System’s proportion of uninsured patients decreased by 10%.¹⁴  
• Medicaid expansion has a positive impact on states’ economies. From 2013 to 2020, the Medicaid expansion is expected to bring in more than $414 billion in federal funding to the 28 expansion state economies.¹⁵ In Arkansas, expansion has allowed the State to institute approximately $100 million in tax cuts that would not otherwise have been economically feasible.¹⁶ In fiscal year 2014, Ohio saved approximately $10.3 million in institution medical service expenditures as compared to fiscal year 2013 by having Medicaid cover inmate hospitalizations.^17,18  

At least one recent report also documents the economic and employment costs of not expanding.¹⁹ North Carolina lost $2.7 billion in federal funding in 2014, creating 23,000 fewer jobs and causing the State to lose almost $100 million in potential State tax revenue.²⁰  

As the early expansion states incorporate expansion-related savings into their fiscal year 2015 and 2016 state budgets and begin to document improvements in coverage, access, and outcomes, the impact of the Medicaid expansion can be more fully evaluated. However, even the early data confirm the positive impact that many projected, providing new, important context for states that are still contemplating whether to expand.

_{¹In Pennsylvania, expansion began on January 1, 2015.}

_{²Garfield, Rachel, Anthony Damico, Jessica Stephens, and Saman Rouhani. “The Coverage Gap: Uninsured Poor Adults in States That Do Not Expand Medicaid – An Update.” Henry J. Kaiser Family Foundation. November 12, 2014. http://kff.org/health-reform/issue-brief/the-coverage-gap-uninsured-poor-adults-in-states-that-do-not-expand-medicaid-an-update/.}

_{³This figure includes both individuals who are newly eligible for Medicaid with expansion and those who were previously eligible.}

_{⁴Centers for Medicare & Medicaid Services. “Medicaid & CHIP: October 2014 Monthly Applications, Eligibility Determinations and Enrollment Report.” Medicaid.gov. December 18, 2014. http://www.medicaid.gov/medicaid-chip-program-information/program-information/downloads/october-2014-enrollment-report.pdf.}

_{⁵Garfield, Rachel, Anthony Damico, Jessica Stephens, and Saman Rouhani. “The Coverage Gap: Uninsured Poor Adults in States That Do Not Expand Medicaid – An Update.” Henry J. Kaiser Family Foundation. November 12, 2014. http://kff.org/health-reform/issue-brief/the-coverage-gap-uninsured-poor-adults-in-states-that-do-not-expand-medicaid-an-update/.}

_{⁶Witters, Dan. "Arkansas, Kentucky Report Sharpest Drops in Uninsured Rate." Gallup. August 5, 2014. http://www.gallup.com/poll/174290/arkansas-kentucky-report-sharpest-drops-uninsured-rate.aspx.}

_{⁷This dataset contains 450 hospitals from 25 states across the country.}

_{⁸Center for Health Information and Data Analytics, Colorado Hospital Association. “Impact of Medicaid Expansion on Hospitals: Updated for Second-Quarter 2014.” Colorado Hospital Association. September 2014. http://www.cha.com/Documents/CHA-Study/FINAL-CHA-Medicaid-Expansion-Study-Q2-Sept-2014.aspx.}

_{⁹DeLeire, Thomas, Karen Joynt, and Ruth McDonald. “Impact of Insurance Expansion on Hospital Uncompensated Care Costs in 2014.” Office of The Assistant Secretary for Planning and Evaluation. September 24, 2014. http://aspe.hhs.gov/health/reports/2014/UncompensatedCare/ib_UncompensatedCare.pdf.}

_{¹⁰Haynes, Jim, Arizona Hospital and Healthcare Association. "April 2014 Hospital Financial Results." Arizona Daily Star. June 13, 2014. http://tucson.com/arizona-hospital-and-healthcare-survey/pdf_d7ec6a21-643f-5793-81a2-f307cef1f42e.html.}

_{¹¹Arkansas Center for Health Improvement. "AHA Report Measures Impact of Private Option on Arkansas Hospitals." Arkansas Center for Health Improvement. October 31, 2014. http://www.achi.net/Pages/News/Article.aspx?ID=56; Arkansas Hospital Association and Arkansas Chapter of the Healthcare Financial Management Association. "Arkansas Private Option." Arkansas Center for Health Improvement. October 31, 2014. http://www.achi.net/Docs/260/.}

_{¹²Center for Health Information and Data Analytics, Colorado Hospital Association. “Impact of Medicaid Expansion on Hospital Volumes.” Colorado Hospital Association. June 2014. http://www.cha.com/Documents/Press-Releases/CHA-Medicaid-Expansion-Study-June-2014.aspx.}

_{¹³ Baker, Deirdre. "Hospital Group Study: Iowa's Medicaid Expansion Is Working." Quad-City Times, November 13, 2014. http://qctimes.com/news/local/hospital-group-study-iowa-s-medicaid-expansion-is-working/article_7985461c-b119-5385-8c55-5e670363b68a.html.}

_{¹⁴ Patton, Wendy. “Medicaid expansion benefits Ohio.” Policy Matters Ohio. September 2014. http://www.policymattersohio.org/wp-content/uploads/2014/10/Medicaid.pdf.}

_{¹⁵Holahan, John, Matthew Buettgens, and Stan Dorn. “The Cost of Not Expanding Medicaid.” (The Kaiser Commission on Medicaid and the Uninsured, 2013).} 

_{¹⁶Beebe, Mike. “Governor Beebe's weekly column and radio address: Taking Advantage of Opportunity.” Arkansas Governor Mike Beebe. October 24, 2014. http://governor.arkansas.gov/newsroom/index.php?do:newsDetail=1&news_id=4690.}

_{¹⁷Ohio Legislative Service Commission. "Medicaid Coverage of Inmate Hospitalizations Reduces State’s Expenditures for Institution Medical Services." Budget Footnotes, September 2014, 15. http://www.lsc.ohio.gov/fiscal/bfn/v38n01.pdf.}

_{¹⁸The $10.3 million in savings includes both savings associated with covering newly eligible and previously eligible inmates. Ohio began covering hospitalizations for previously eligible inmates on July 1, 2013 and extended coverage to newly eligible inmates on March 17, 2014.}

_{¹⁹Ku, Leighton, Brian Bruen, Erika Steinmetz, and Tyler Bysshe. “The Economic and Employment Costs of Not Expanding Medicaid in North Carolina: A County-Level Analysis.” Cone Health Foundation. December 1, 2014. http://www.conehealthfoundation.com/app/files/public/4202/The-Economic-and-Employment-Costs-of-Not-Expanding-Medicaid-in-North-Carolina.pdf.}

_²⁰Id.