Two Americas: Hospitals, Charity Care and Medicaid Expansion

As we move halfway through 2014, rapid changes in how health care is being delivered to our lowest income families are taking place across the country.  As I noted last week multiple surveys are showing a significant drop in the rate of uninsured adults nationwide, with most of the reduction coming in states that have expanded Medicaid with the new federal dollars available under the Affordable Care Act.  This discrepancy between the majority of states that have acted to close the Medicaid coverage gap and those that have not is starting to divide our country into two distinct regions, not by geography or population but literally by the decision of each state on accepting federal Medicaid expansion funding.

The latest effect now becoming clear in the reluctant states not yet expanding coverage is the dramatic decline in hospital charity care being delivered in expanding states.  January 1, 2014 was the first date states could take advantage of the opportunity to expand Medicaid coverage and even just a few months into the year changes are already easily seen.

In a survey released this week by the Arizona Hospital and Healthcare Association, Arizona hospitals saw a 31 percent drop in uncompensated care in the first four months of 2014 – a $76 million savings.  This saving is likely accelerating as more patients show up for care finally able to pay their bills.

Arizona’s survey reflects a nationwide study by the Colorado Hospital Association issued last month.  That study surveyed 465 hospitals across 30 states, half of whom expanded Medicaid and half who did not.  The findings were equally startling.  Across states that had expanded Medicaid to close the coverage gap average charity care cost in each hospital had dropped 30% in just the first three months of 2014.

Contrast these changes to the drama this week surrounding the closing of a community hospital in North Carolina, a state that has so far rejected expanding Medicaid.  Rural Belhaven, NC mayor Adam O’Neal announced he would be walking from Belhaven to Washington, DC to bring attention to the hospital closure:  “I’m walking for Medicaid expansion…”

Adam O'Neal, Mayor of Belhaven, NC (Photo credit: Adam Linker)
Adam O’Neal, Mayor of Belhaven, NC (Photo credit: Adam Linker)

So, in one region of the United States hospitals are seeing dramatically lower costs from charity care patients.  In America’s reluctant region, small town mayors are fighting to keep hospitals open any way they can.  And this is only six months into the changes being driven by the expansion of Medicaid coverage.  My prediction is we will not only continue to see contrasting stories like these but that the divide between the reluctant Medicaid states and the rest of the country will only grow.

Why? Hospitals and individuals gaining coverage are only the first harbingers of even more economic changes.  Doctors and hospitals being paid for care that used to be delivered free or not at all means more jobs, more pay and more security for health care providers.  And that can only have a ripple effect through the economy.  Different studies have tried to quantify these effects but I think it indisputable that Medicaid expansion states will see new and significant changes in their economies. As a result, we will continue to see sharp contrasts such as the one between the rural mayor’s hospital closing and the substantial hospital savings in other states.  This is because, lost in the details of the Medicaid debate, people often forget just how much money is at stake for states currently declining federal Medicaid expansion funding.

The Commonwealth Fund last year created a chart in a report comparing the amount of federal money each state could expect from expanding Medicaid compared to the amount of federal money each state received in federal highway funding and federal defense funding. In some more rural states like North Carolina and West Virginia federal money coming to the state for highways and the military was actually less than the state could expect from a Medicaid expansion.  And in all states, the amount of federal money from expanding Medicaid rivals the other federal funding expended in these two biggest areas of federal-state interaction.

Commonwealth Fund Chart

In other words, Medicaid expansion compares favorably to the economic and – don’t forget – social impact of the biggest federal projects we have taken on as a nation.  Consequently, reluctant Medicaid states are taking our country into a division of economics and policy towards low-income people that hasn’t been seen in more than a generation. We are starting to see the early signs of these two Americas in the data and stories surrounded the numbers of uninsured people and charity care and can only expect to see these differences grow throughout the next year.

Adam Searing
Adam Searing is an Associate Professor of the Practice at the Center for Children and Families