Effects of the Affordable Care Act and Medicaid Expansion on Hospitals' Uncompensated Care

Abstract

The Affordable Care Act (ACA) of 2010 mandated health insurance coverage for all Americans and increased Medicaid funding for people who could not otherwise afford health care coverage. Because everyone would have access to health insurance, policy makers and economists predicted a decline of uncompensated hospital care. However, fourteen US states chose not to participate in Medicaid expansion of the ACA. Since then seventy-two hospitals in those fourteen states have closed versus twenty-nine hospitals in the other thirty-six states. Often, hospital closures negatively affect access to health care for the people who live in those communities. We analyze the effect of state-level decisions to accept or decline Medicaid expansion on not-for-profit hospitals’ financial health and their ability to continue services. We analyze financial information from the Internal Revenue Service’s Form 990 for ten not-for-profit hospitals in Kentucky, ten in Virginia, and ten in Tennessee. In addition, we explore data from the Tennessee Department of Health on ten Tennessee hospitals that have closed since the ACA was enacted in 2010. We examine the reported amount of uncompensated care as a percentage of total revenue. Exploring those ratios over time illustrates the effect implementation of the ACA had on uncompensated care in not-for-profit hospitals. Furthermore, comparing hospitals’ ratios from states that accepted versus those that declined additional Medicaid funding demonstrates the effectiveness of Medicaid expansion on uncompensated care. Preliminary results from our research indicate that hospitals from states that did not participate in Medicaid expansion demonstrate significantly higher volumes of uncompensated care.