Medicaid Expansion Helped Improve Provider Financial Performance

Medicaid expansion has positively impacted healthcare providers by boosting financial performance and resulting in payer mix improvements, data from the Kaiser Family Foundation (KFF) found.

All but 11 states have expanded Medicaid eligibility as of January 2023, which has been associated with better access to healthcare coverage for consumers and financial benefits for providers.

The issue brief summarizes 24 studies published between April 2021 and December 2022 that assessed the economic impact Medicaid expansion has on providers. The brief also summarizes earlier findings from research published between January 2014 and March 2021.

The study findings were divided into two topic areas: the impact on payer mix and providers’ financial performance.

The earlier studies indicated that Medicaid expansion was associated with improvements in payer mix for hospitalizations, emergency department visits, community health center visits, and safety-net clinic visits. The payer mix improvements include noted declines in uninsured patients and increases in Medicaid-covered patients.

The studies also found that Medicaid expansion was tied to lower uncompensated care costs overall and for specific types of hospitals, including rural facilities.

Similarly, of the 18 recent studies that assessed the impact on payer mix, 11 studies found decreases in the share of uninsured patients and increases in patients covered by Medicaid. Five studies found increases in Medicaid patients but no impact on the proportion of uninsured patients.

Additionally, three studies found decreased uncompensated care costs for hospitals and other providers. Two studies considered the impact on payer mix at primary care organizations and found that Medicaid-covered visits to primary care providers increased.

Findings from prior and recent studies revealed that Medicaid expansion improved the financial performances of hospitals and healthcare providers.

Earlier studies found that expanding Medicaid helped boost hospital revenue overall and for specific services. Some studies also suggested that Medicaid expansion helped reduce the number of annual hospital closures.

However, outcomes varied by provider type. For example, some studies indicated that financial performance improvements were greater for rural and small hospitals.

Out of the eight recent studies focused on financial performance, six indicated that Medicaid expansion improved economic outcomes for a range of provider types. Meanwhile, two studies suggested that these benefits did not reach critical access hospitals or free and charitable clinics.

Decreases in uncompensated care costs at hospitals outweighed the increases in unreimbursed Medicaid care, leading to a net positive impact.

According to a few studies, federally qualified health centers and community health centers experienced higher revenues after states adopted Medicaid expansion. One study also found higher salary growth for primary care providers in expansion states.

Hospitals and other providers, specifically Medicaid providers, have experienced significant financial challenges since the COVID-19 pandemic began. The KFF research offers additional information to consider in the ongoing debate about Medicaid expansion in states that have yet to expand.

Past research published in JAMA Network revealed that Medicaid expansion was also associated with fewer medical debt collections. States that expanded Medicaid in 2014 saw a 45 percent decline in the mean flow of medical debt collections compared to states that did not expand Medicaid or expanded after 2014.