Hospitals in 15 states could take financial hit from Medicaid work requirements

Hospitals in states that mandate work requirements as a condition of Medicaid coverage could see reduced revenues, increased uncompensated care costs and smaller operating margins, according to a new Commonwealth Fund study.

However, the study noted that the requirements would affect hospitals differently across states based on numerous factors, such as the design of states' Medicaid work requirement programs.

For the report, researchers examined how Medicaid work requirements could affect hospitals' finances in states that have approved or have pending waiver applications for implementing such requirements. Studied states were:

  • Alabama
  • Arkansas
  • Arizona
  • Indiana
  • Kentucky
  • Michigan
  • Mississippi
  • New Hampshire
  • Ohio
  • Oklahoma
  • South Dakota
  • Tennessee
  • Wisconsin
  • Virginia
  • Utah

Researchers specifically looked at early results of Medicaid coverage loss from implementation of work requirements in Arkansas, as well as other recent studies, to estimate the potential financial implications for hospitals using a simulation model.

Three findings:

1. Hospitals across all states that implement the requirements could see a loss in revenue, totaling between $3.7 billion and $4.1 billion this year. Researchers noted that the financial affects will vary across states, depending the design of the state's work requirement programs.

2. Medicaid work requirements could result in an increase in uncompensated care costs — between $2.5 billion to $3.7 billion in 2019 — for hospitals across states that implement them. The study said this is largely because more people would become permanently or temporarily uninsured. Medicaid expansion states would see the biggest increases in uncompensated care costs.

3. Hospitals in states with Medicaid work requirements could see reduced operating margins due to lower Medicaid revenues and increased uncompensated care costs. For instance, the average hospital margin in Alabama would be a negative margin of 2.3 percent in 2019 without the requirements, according to the study. But this margin would drop by up to 0.6 percentage points with the requirements.

Access the full study results here.


More articles on healthcare finance:

'Medicare for All' would reduce hospital operating margins by more than 20 percent, analysis finds
8 Vermont hospitals report negative operating margins in FY 2018, review shows
The top financial pressures facing healthcare organizations: 5 leaders discuss


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