The Financial Benefit to Hospitals from State Expansion of Medicaid

The Financial Benefit to Hospitals from State Expansion of Medicaid

Abstract

State decisions to expand Medicaid have important implications for hospitals. There are a number of provisions in the Affordable Care Act that will reduce hospital payments - lower rates of Medicare reimbursement and cut backs in Medicare and Medicaid disproportionate share hospital payments. On the other hand, hospitals stand to gain considerably from the added insurance coverage because of the Medicaid expansion. Fewer uninsured will mean higher revenues to hospitals. However, some newly covered Medicaid patients will have formally been privately insured. For these patients, Medicaid will typically pay less than private insurance. On balance, we show that for each $1.0 in private revenue that the Medicaid expansion eliminates, hospitals Medicaid revenue increases by $2.59.

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