Hospital Uncompensated Care Costs Down After LA Medicaid Expansion

After Medicaid expansion in Louisiana, hospital uncompensated care costs decreased by about a third—significantly more compared to some other expansion states—with public and rural hospitals benefiting the most, according to a new Health Affairs study.

The study found that hospital uncompensated care costs as a share of total operating expenses fell from about 7 percent, on average, in the fiscal year prior to Medicaid expansion in Louisiana to just above 3 percent three years later.

In contrast, trends in hospital uncompensated care costs for facilities in non-expansion states remained relatively stable during the same period, indicating an association with Louisiana’s Medicaid expansion and hospital uncompensated care costs, the study stated.

In total, researchers found that the Medicaid expansion effort was associated with an average reduction in hospital uncompensated care costs of 2 percentage points, or a 33 percent decline, compared to the pre-expansion mean.

For rural hospitals in the state, the reduction was even larger at 4.7 percentage points after Medicaid expansion versus rural hospitals in non-expansion states, which equated to a 55 percent relative decline compared to the pre-expansion mean.

In contrast, urban hospitals saw a 1.8 percentage point, or 31 percent, reduction in uncompensated care costs compared to the pre-expansion mean.

Additionally, public hospitals in Louisiana saw a more significant reduction in uncompensated care costs after Medicaid expansion although the facilities continued to provide the highest levels of uncompensated care before and after the expansion.

Hospital uncompensated care costs fell by 61 percent among public hospitals in the period after Medicaid expansion, while these costs declined by just 31 percent among private, non-profit hospitals and 18 percent among for-profit hospitals in the state.

But even these smaller gains among certain types of hospitals in Louisiana have been significantly greater than overall reductions in hospital uncompensated care costs observed in other states that have expanded Medicaid eligibility under the Affordable Care Act, the study suggested.

Previous research on the association of Medicaid expansion and hospital uncompensated care costs have identified general reductions in the range of 25 to 28 percent, putting reductions in Louisiana well above average compared to other states that have expanded Medicaid eligibility.

Researchers attributed larger reductions in hospital uncompensated care costs to Louisiana’s relatively high uninsurance rate prior to Medicaid expansion. In fact, the state had “traditionally provided sparse coverage options to adults” prior to the expansion, including excluding non-disabled childless adults from Medicaid, researchers noted.

The study also used up to three years of data after the expansion was complete, which may have influenced the relative reduction in hospitals uncompensated care costs observed in Louisiana, researchers added.

However, researchers stressed that this state-specific study could have serious implications for other states that have elected not to engage with Medicaid expansion or that are considering it now.

“Louisiana remains the only state in the Deep South to have expanded Medicaid under the Affordable Care Act and can serve as a model for states that have not adopted expansion, many of which are located in the South census region,” they wrote in the study.

Nine of the total fourteen non-expansion states are located in the South census region and these Southern non-expansion states have similar populations as the one in Louisiana, especially compared to those in other expansion states.

For example, average hospital uncompensated care provision in 2012 by hospitals in current non-expansion states more closely resembled that of hospitals in Louisiana than that of hospitals in other Medicaid expansion states, researchers found.

Additionally, Louisiana had similar uninsurance rates for the non-elderly and per capita income in current non-expansion states versus the average Medicaid expansion state.

“As a result, Louisiana can serve as a model for projecting the impacts of Medicaid expansion in the remaining nonexpansion states as they consider whether to adopt expansion,” the study concluded.

Many Deep South states, however, have yet to adopt Medicaid expansion, including Mississippi where the topic was a major issue in both the August 27 Republican primary and in the November 5 general election.

Lieutenant Governor Tate Reeves, who opposes expansion, won both races, making Medicaid expansion unlikely over the next four years, Kaiser Family Foundation reports.

Other Deep South states, including Alabama and Georgia, have sought alternative Medicaid eligibility reform, including work requirements.

State leaders may keep Medicaid expansions off the table in Deep South states despite reported hospital and patient benefits, even in states with similar populations.

However, the Biden administration is focused on increasing Medicaid eligibility, especially in light of job disruptions caused by the ongoing COVID-19 pandemic. The administration is already reconsidering work requirement policies approved by the previous administration and devising other ways to strengthen Medicaid, which may include additional Medicaid expansion initiatives.