Hospital costs fall with expanded Medicaid

By
Courtesy of the Associated Press

June 30, 2014

Ohio’s decision to expand Medicaid has resulted in a sharp decline in the number of uninsured patients showing up for free treatment at local hospitals.

But hospital officials were quick to point out the savings on so-called charity care for low-income patients must be balanced against financial pressures in other areas of operation before they can determine the true impact on their bottom lines.

“We are seeing the trend, but we have not quantified it yet,” said Elizabeth Long, a spokeswoman for Dayton-based Kettering Health Network, which provided about $36 million in charity care last year. But “we anticipate that our charity care losses will decrease because of expanded Medicaid.”

The Ohio Controlling Board — following the lead of Gov. John Kasich — voted last October to accept $2.5 billion in federal money to expand Medicaid under the Affordable Care Act to about 366,000 newly eligible Ohioans earning less than 138 percent of the federal poverty level, through 2015.

Since then, more than 185,000 newly eligible applicants have been approved for coverage, according to Ohio Medicaid, resulting in a sharp decline in the volume of uninsured patients seeking treatment for free or at reduced prices. At the same time, however, hospital costs continue to rise in other areas, including bad debts incurred by patients who have insurance coverage but are unable or unwilling to pay their bills.

In addition, the health care law imposes significant cuts in hospital reimbursements for Medicare — the federal health insurance program for people 65 and older — which has also drained hospital coffers.

“We anticipate that Medicaid expansion will have a positive impact, and that it is good for the entire community,” said Diane Ewing of locally-based Premier Health. “At this time, it is too early to determine the impact on charity care as there are many factors that go into reconciling all of the data.”

Still, hospitals in the 26 states and District of Columbia that have expanded Medicaid are operating in a much more favorable situation than hospitals in states that have so far decided not to expand the program, said Bryan Bucklew, president and CEO of the Greater Dayton Area Hospital Association.

“Ohio was a ahead of the curve on this, and it puts us in a little bit of a better position from a financial standpoint,” Bucklew said. “A year ago, you had a lot of people, including in Ohio, talking about how do we not do Medicaid expansion. We’re seeing a 180-degree reversal now in these states that previously said they don’t want to do Medicaid. Now they’re trying to figure out how do we set up a program like Ohio’s.”

The opposition to Medicaid has already eroded in Arizona, where Gov. Jan Brewer — a staunch critic of the health care law who initially opposed Medicaid expansion — earlier this month signed a law expanding the state’s Medicaid program.

Bucklew said he thinks the vast majority of states that opposed expansion will follow suit, and the country will eventually end up with only a handful of states that don’t expand.

A recent study from the Colorado Hospital Association, which collects monthly financial reports and volume data from hospitals across the country, shows why many non-expansion states may reconsider their positions on Medicaid.

The study lumped participating hospitals from states that expanded Medicaid into one group and hospitals in non-expansion states into another group and compared charity care losses for each group through the first quarter this year.

On average, the amount of charity care provided per hospital in expansion states declined about 32 percent, from $2.8 million in the first quarter last year to $1.9 million this year, the study found. By comparison, the average amount of charity care in non-expansion states increased about 11 percent over the same period, from $3.8 million to $4.2 million.

“To see such a dramatic difference between the two groups at the same time as such a wide-sweeping policy change…it really doesn’t leave a lot of question as to what the cause was,” said Alexandra Mannerings, the study’s lead researcher, noting that charity care costs had been rising steadily across the country before Medicaid expansion took effect this year.

And charity costs could fall at an even faster pace than the study indicated following a recent surge in Medicaid enrollments stemming from a backlog of applications that were not properly processed through HealthCare.gov — the federal website for Medicaid enrollment, said Chris Tholen, vice president of finance for the Colorado hospital association.

“We didn’t expect to see such a dramatic change so early,” Tholen said. “And while these are the earlier trends we’re seeing, it’s very possible we’ll see even a greater magnification of the trend going forward.”

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©2014 the Dayton Daily News (Dayton, Ohio)

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