The choice for states to expand Medicaid could affect the financial health of hospitals by decreasing the proportion of patient volume and unreimbursed expenses attributable to uninsured patients, while increasing revenue from newly covered patients. This study estimates the effects of the ACA on hospital finances in 2015 and how they differ between hospitals in states that expanded Medicaid and hospitals in states that did not expand Medicaid. This analysis has two main objectives. First, it expands upon a 2016 study that found that the 2014 ACA Medicaid expansion lowered hospitals’ uncompensated care burden attributable to uninsured patients, increased Medicaid revenue, and was associated with improved profit margins through part of 2014. By adding a full year of ACA exposure data through fiscal year (FY) 2015, this analysis provides a firmer assessment of the Medicaid expansion for states that elected to expand in early 2014. Second, this analysis explores what types of hospitals benefited from the ACA Medicaid expansion.
Using data through fiscal year 2015, this new analysis finds that the Medicaid expansion under the ACA increased Medicaid revenue by $5.0 million per hospital, reduced costs of uncompensated care by $3.2 million per hospital, and improved average operating margins by 2.5 percentage points. This study also finds that the financial benefits of the Medicaid expansion on hospitals’ profit margins were strongest for small hospitals, for-profit and non-federal-government-operated hospitals, and hospitals located in nonmetropolitan areas. The American Health Care Act, which was considered by Congress but ultimately did not reach the House floor for a vote, would have repealed the state option to expand Medicaid under the ACA. However, with the ACA remaining intact for now, states that did not expand Medicaid have the chance to reconsider.