Rural Health Policy Project

Study Documents How Medicaid Expansion Helps Keep Rural Hospitals Open

Comprehensive research in the journal Health Affairs was recently published looking at the effect of state Medicaid expansions on hospital closures. Focusing on especially rural hospitals, the authors conducted a comprehensive and sophisticated analysis, finding:

“[T]he ACA’s Medicaid expansion was associated with improved hospital financial performance and substantially lower likelihoods of closure, especially in rural markets and counties with large numbers of uninsured adults before Medicaid expansion.”

In addition, higher Medicaid coverage levels meant a much stronger financial picture for hospitals, especially rural hospitals.  The authors were clear about the effect of repealing Medicaid expansion given their in-depth look at hospital operation and finances:

“If policymakers repeal the ACA’s Medicaid expansion, many rural hospitals in expansion states will need additional subsidies to remain in operation.”

And in one story about the study UNC professor Mark Holmes expanded on the larger economic ramifications of rural hospital closures:

“Losing an employer of 150 people with good jobs is like losing a manufacturing plant,” Holmes said “Hospitals are usually the largest, or the second-largest, employer in a community. That’s something that’s easy to lose sight of because we think of this from a health standpoint. But the effects are wide-ranging when a hospital closes.”

Overall, this study provides the first rigorous direct correlation that I am aware of between states that have expanded Medicaid and the ability of rural hospitals to stay open in those states.  While we have seen this relationship before, the authors here went to considerable trouble to look at the financial performance of hospitals over time and carefully control for the multiple other factors that might contribute to a hospital deciding to close it doors.

Policymakers should carefully consider changes that either eliminate or sharply reduce the coverage provided by Medicaid expansions. As this research shows, those changes could have a significant negative effect on the ability of rural hospitals to stay open.  And closing of a rural hospital hurts not only people covered by Medicaid but everyone in the hospital’s service area regardless of their type of health coverage. Conversely, Medicaid non-expansion states — especially with significant numbers of rural hospitals – would do well to consider the help Medicaid expansion could provide to keeping these hospitals open.

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