Some safety-net hospitals are seeing the best bottom lines in years. But for those in states that refused to expand Medicaid, little has changed.

Published Online: July 23, 2015

Mary K. Caffrey

Decisions by states on whether to expand Medicaid under the Affordable Care Act (ACA) have created many sets of winners and losers. Already, public health researchers are reporting effects such as increased diabetes diagnoses among Medicaid beneficiaries in expansion states.For one set of “have nots,” the fallout is largely financial. Public hospitals in states that have extended Medicaid to households earning up to 138% of the federal poverty line have seen an infusion of revenue, with some enjoying the best bottom lines in years.

Meanwhile, public hospitals in states that refuse to expand are seeing the worst of all worlds: they must still care for all who walk in their doors, yet the quirks of a law that envisioned universal expansion are working against them, and their finances are not getting better.

Disparities in the health of so-called “safety net” hospitals have ripple effects beyond the doors of the buildings themselves, which is why the last 6 months have brought calls for Medicaid expansion from business groups in states like Florida, Missouri, and Tennessee, imploring conservative legislators to set aside ideology and think practically, for the sake of jobs and community well-being.

As reported by Reuters, the difference between serving a population that is increasingly insured and one that is not plays out in multiple ways, from increases in bad debt to the ability to maintain solid financial profiles with bond rating agencies.

Reuters contrasted the finances between Chicago’s Cook County hospital and Atlanta’s Grady Hospital, which both serve urban communities with above-average poverty levels. At Cook, the share of uninsured patients has dropped from half to one-third in less than 2 years—for the first time in Cook's history, a majority of the patients had coverage.

At Grady, meanwhile, the number of uninsured patients held steady at around one-third, increasing just 2% in 2014.

Earlier this year, a pair of economists from Northwestern and Columbia outlined how hospitals in nonexpansion states are paying the price for the political decisions to not expand Medicaid.

The study, “Hospitals as the Insurers of Last Resort,” found that the costs of uncompensated care in states that declined expansion exceeded what the states would have paid if they had accepted expansion. Hospital bottom lines bear the burden of caring for the uninsured, which could cost the community jobs and the institution’s ability to pay bills.

According to the Kaiser Family Foundation, about 4 million Americans fall into a coverage “gap,” meaning they make too much for Medicaid but not enough to qualify for insurance on the federal exchange, healthcare.gov. These consumers disproportionately live in the Deep South, where the strain on rural community hospitals is being felt acutely. In these areas, the rural hospital is typically not only a provider of healthcare, but also an important employer and purchaser of goods and services. Its financial health—or lack of it—affects other businesses.

The ACA envisioned scaling back on financial supports for safety net hospitals as more and more low- and moderate-income households gained coverage. This spring in Florida, a standoff between CMS and Governor Rick Scott ensued as a deadline neared for a Medicaid waiver that had provided infusions of federal aid to that state’s safety net hospitals. The Obama Administration did not want to continue the arrangement in lieu of Medicaid expansion. CMS finally blinked, but only partly: Florida’s aid levels will drop in fiscal year 2017. A battle is brewing as similar deadline nears in Texas.