Hospitals Likely to Lobby States on Medicaid Expansion

Hospitals could push states to expand their Medicaid enrollment, as they stand to gain millions if more people have insurance -- or lose millions if they don't.
by | July 3, 2012 AT 4:00 PM

Among the many stakeholders to receive a sense of finality last week when the Supreme Court decided to largely uphold the Affordable Care Act (ACA) were non-profit hospitals. But also like most other health-care providers, those hospitals will now be watching closely as states debate whether they will voluntarily adopt the law’s Medicaid eligibility expansion.

Less than a week after the Court’s decision, hospitals are beginning to take an active interest in their state’s decision to join the Medicaid expansion or not. The Court concluded that, while the Obama administration could offer enhanced federal funding to entice states to participate in the eligibility expansion, it could not revoke existing federal Medicaid funding to states that do not. By removing the administration’s enforcement mechanism, the decision essentially made the Medicaid expansion optional.

GOP officials in states such as Florida, Mississippi, Texas and Wisconsin quickly stated that they might not voluntarily increase their enrollment or would at least wait until the November election in hopes that Mitt Romney would defeat President Barack Obama and halt implementation of the law. As Governing previously explained, states will be approaching the expansion with distinct political and fiscal factors to consider, depending on how many people are projected to be eligible and how much they are expected to spend on the expansion once the 100 percent federal match expires in 2016.

“I’m pleased that (the ruling) gives states more ability to push back against a forced expansion of Medicaid,” Texas Health and Human Services Executive Commissioner Tom Suehs, whose state would add 2 million people and spend $2.6 billion through 2019 under the expansion if fully implemented, said in a statement. “The court clearly recognized that the Affordable Care Act put states in the no-win situation of losing all their Medicaid funding or expanding their programs knowing they would face billions of dollars in extra costs down the road.”

Despite such rhetoric from state leaders, the Texas Hospital Association pushed back in its own response to the ruling, noting that without an expansion of Medicaid coverage, hospitals would be forced to pick up the tab for those treated without insurance, a sentiment likely to be shared among other hospitals in states that might hesitate to expand Medicaid.

“Texas hospitals recognize there are concerns with expanding the Medicaid population, but given the state’s high number of uninsured, all options for gaining insurance coverage must be closely considered,” Dan Stultz, executive director of the Texas Hospital Association, said in a statement. “Without the Medicaid expansion, many will remain uninsured, shifting costs to the insured and increasing uncompensated care to health-care providers.”

Uncompensated care cost hospitals nationwide a combined $39.1 billion in 2009, according to estimates from the American Hospital Association.

In part because of those concerns, policy analysts expect most states will eventually take the offer of federal money to join the Medicaid expansion, despite initial indications to the contrary. Not participating "would hurt hospitals and other providers who treat the uninsured, and they could put pressure on states to take the money that’s on the table to expand coverage," said Diane Rowland, executive vice president at the Kaiser Family Foundation.

While state-by-state figures are not available, hospitals contributed $23 million to political candidates and committees during the 2008 campaign, according to -- an indication of the political capital they are capable of wielding. It remains to be seen how much pressure they will apply on the Medicaid expansion question or how they will do so.

Also of concern to hospitals is one of the ACA’s key cost-savings provisions: a cut to disproportionate share reimbursement payments, which pays out billions annually to hospitals that care for a larger percentage of low-income and uninsured payments, according to new market analysis from Wells Fargo Securities. Under the law, Medicaid payments for the program are expected to decrease by $14.1 billion from 2014 to 2020, according to research by Becker’s Hospital Review. The cuts will be divided among states based on the level of participation in the program in each state.

Despite those payment reductions, hospitals will be operating with more certainty now that the Supreme Court has upheld the law, the Wells Fargo analysis concluded, and that will allow them to pursue their other cost-savings through other ACA reforms. Most fundamentally, hospitals will benefit from greater insurance penetration, both from greater Medicaid enrollment in states that adopt the ACA expansion and greater private insurance through the state health exchanges and the law’s other market reforms.

The map below details each state's uninsured population that could be eligible for Medicaid and each state's expected spending for the ACA's Medicaid expansion. Darker states have higher percentages of uninsured residents who are potentially Medicaid eligible. Click a state for additional information.


Zoom out to view Alaska and Hawaii data.

SOURCE: Medicaid eligibility estimates obtained from Urban Institute analysis of American Community Survey and Integrated Public Use Microdata Series data. State spending figures obtained from Medicaid Coverage and Spending in Health Reform: National and State‐by‐State Results for Adults at or Below 133% FPL, published May 2010 by the Kaiser Family Foundation.