Study: Hospitals in States With No Medicaid Expansion Face Financial Crisis

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When hospitals got onboard with the Patient Protection and Affordable Care Act, there was a sense there would be a tradeoff: disproportionate share hospital payments would be reduced drastically, but the expansion of Medicaid for more uninsured patients would offset those losses.

However, since the Supreme Court's ruling in June that Medicaid expansion is optional, hospitals in some states face dire financial situations, according to an article in the New England Journal of Medicine.

Under the PPACA, the Medicaid expansion, individual mandate and health insurance regulations are expected to boost health coverage to 33 million uninsured Americans by 2022, according to the article. Hospitals would receive more reimbursements from Medicaid, which would offset reductions to the DSH program. Between 2014 and 2020, Medicaid DSH payments will be cut by $18.1 billion, and a new formula to Medicare DSH payments will also cut federal funds to hospitals that treat higher numbers of the uninsured. In total, $51 billion in DSH payments are projected to be cut during that time span, according to the study.

Currently, eight governors have pledged to not expand Medicaid, an unforeseen circumstance from 2010. Hospitals in those states not only face reductions to DSH payments, but also the potential of higher uncompensated care costs.

"To date, the Medicaid-expansion debate has focused on the potential savings for states concerned about financing 10 percent of the costs after 2019," wrote John Graves, PhD, assistant professor at Vanderbilt University School of Medicine and author of the article. "But without either federal changes to DSH formulas or a full expansion of affordable coverage to the uninsured with incomes below the poverty line, states forgoing the Medicaid expansion are likely to leave a substantial uncompensated care burden on hospitals."

More Articles on Medicaid Expansion:

Medicaid Spending Hampered Several States' Budgeting for 2013
Nevada's Brian Sandoval First GOP Gov. to Support Medicaid Expansion
HHS: Partial Medicaid Expansions Will Not Receive 100% Federal Funding

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