Hospitals in states that opt not to expand Medicaid are at a severe disadvantage to their counterparts in other states, not only because they will miss out on additional Medicaid-based reimbursement, but also because they will face the same cuts in disproportionate share funding as everyone else.
This article appears in the May issue of HealthLeaders magazine.
Medicaid is widely regarded as a poor payer related to costs, but hospitals, especially the nation's safety-nets, are eager to get more of their state's residents on the plan nevertheless. That's because Medicaid's reimbursement rate, which varies by state, is much better than nothing at all, which is what many hospitals claim they get, in reimbursement terms, from treating the uninsured.
But getting more of their patient mix from Medicaid patients rather than the uninsured will be difficult for those in states that have so far refused to expand their Medicaid rolls. Refusing expansion, of course, is their right, according to the Supreme Court's 2012 decision on the constitutionality of the Patient Protection and Affordable Care Act, in which the Medicaid expansion is enfolded.
But doing so might not only transfer funding to states that do expand, but it also might leave safety-net hospitals with the same costs to treat the uninsured, while other sources of funding, such as disproportionate share dollars, are reduced over time.
As HealthLeaders went to press, 14 states still have refused to participate in the Medicaid expansion, which would take effect in 2014 and make adults with incomes up to 138% of the federal poverty level eligible to enroll.
The problem, say state governors who are resisting, is that although the federal government has agreed to pick up all of the tab for the first three years of expansion and 90% thereafter, there is no way to ensure that future Congresses will keep those promises, meaning states could be on the hook for more than they bargain for under current rules.
The problem for hospital leaders, however, is that if a state does not choose to expand, hospitals in those states will be forthwith at a severe disadvantage to their counterparts in other states not only because they will miss out on additional Medicaid-based reimbursement, but also because they will face the same cuts in disproportionate share funding that their counterparts in other states will see.