After Medicaid Expansion, a Sharp Drop in Uninsured Hospital Stays

Kentucky experienced the most dramatic change in uninsured hospitalizations: a drop of 13.5 percentage points. States that did not expand Medicaid saw very little change in inpatient payer mix.

As state governments continue to wrangle over Medicaid expansion continues, new data confirms that extending coverage has a great effect on the inpatient payer mix.

States that expanded eligibility for Medicaid in 2014 experienced dramatic decreases in uninsured hospital stays and increases in Medicaid-covered stays, a Health Affairs study shows.

Sayah S. Nikpay

States that did not expand Medicaid saw very little change in inpatient payer mix.

"It's really exactly what policy makers expected. In states that expanded Medicaid you see a pretty sharp uptick," whereas non-expansion states stayed flat-lined, says Sayeh S. Nikpay, PhD, MPH, assistant professor, Department of Health Policy, Vanderbilt University School of Medicine. She was a research fellow at the University of Michigan Institute for Healthcare Policy and Innovation when she conducted the study.

"It is nice when policies have their intended effect," she says.

The effect of Medicaid expansion was obvious, the study shows. Researchers used data on trends in payer mix for non-Medicare adult inpatient hospital stays from HCUP Fast Stats, an online database query tool from AHRQ.

They examined 15 states for which data was available through at least the second quarter of 2014: Arizona, California, Colorado, Hawaii, Iowa, Kentucky, Minnesota, New Jersey, and New York, which expanded Medicaid; and Florida, Georgia, Indiana, Missouri, Virginia, and Wisconsin, which did not.

The study found that between the third quarter of 2013 and the second quarter of 2014, "expansion states experienced a 7-percentage-point jump in the Medicaid share and a 6-percentage-point drop in the uninsured share," the study says. The changes represent a 20% increase in Medicaid charges, and a 50% decrease in uninsured discharges.

"It really does shift these uninsured patients to a source of coverage, and those are good changes in payer mix," Nikpay says.

The study also examined state-specific changes. For instance, Kentucky experienced the most dramatic change in uninsured hospitalizations: A drop of 13.5 percentage points.

But one of the biggest surprises for Nikpay was the changes in Wisconsin, which saw a meaningful increase in Medicaid discharges even though it didn't expand coverage. Nikpay points out that Wisconsin already had a generous Medicaid program: All adults in Wisconsin with incomes of up to 100% of the federal poverty level were eligible for Medicaid.

"That is what we call a 'welcome mat' effect," Nikpay says, and likely happened because people who didn't previously know they were eligible for Medicaid enrolled in the program.

No Expansion, No Change
Overall, though, in non-expansion states, the changes in Medicaid and uninsured discharges were small?less than one percentage point?and not statistically significant.

"What we're seeing is that really there's not much of a change on average? and they're not seeing a change in uninsured," Nikpay says. "Things are proceeding as they would have before the Affordable Care Act."
For hospital executives, Nikpay says the key takeaway is that hospitals are seeing reductions in the amount of uncompensated care they're providing.

"A Medicaid expansion results in favorable changes in coverage," she says. She notes, however, that there's always the possibility of "crowd-out," in which people drop their private insurance and enroll in Medicaid instead.

"They may actually see some reduction in private revenue," she says of hospitals. Whether that will actually happen, or whether a possible drop in privately insured patients would be balanced out by a bigger increase in Medicaid patients, remains to be seen and is a complex question.

In addition, the study notes that "understanding the impact of Medicaid expansion on hospitals will become even more important as we approach 2017, when hospitals in all states will begin facing increasingly large annual cuts in disproportionate-share hospital payments that subsidize the cost of uncompensated care."

In the meantime, though, Nikpay says she hopes that this study will be another piece of evidence for health policy makers to consider as they debate expanding Medicaid in states that haven't already done so, such as South Dakota, Idaho, and Alabama.