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Medicaid Expansion Likely on the Chopping Block

Expecting significant movement to repeal and replace the Affordable Care Act (ACA) early in the next Administration, financial analysts have expressed concern that the proposed changes to Medicaid are likely to have the largest financial impact on hospitals. Since implementation, the ACA marketplaces/exchanges have garnered more media coverage, but hospitals saw more activity from those newly covered by Medicaid.


Losses from the elimination of the Medicaid expansion could include $1.057 billion in revenue, which hospitals gained through an increase in Medicaid days of 1,057,730 at all hospitals from 2013 to 2015. States that initially expanded Medicaid in 2014 saw Medicaid revenue increase (mean annual increase of $3.2 million per hospital) compared with hospitals that did not expand Medicaid eligibility. The financial impact for the expanded-eligibility states could, and probably will, be worse, according to recent research. (“After ACA Repeal, Hospitals Will Feel Medicaid Changes the Most,” HFMA Weekly News, November 23, 2016)


“Most analyses of the financial impact of repeal-and-replace on hospitals do not track the sources of coverage for the 20 million people who the Obama administration says gained insurance coverage under the ACA. A total of 12.7 million were covered through the ACA’s government-run marketplaces—as of the end of the previous open enrollment period—and Medicaid enrollment had grown by more than 15 million since October 2013, when expanded Medicaid eligibility started.” (“After ACA Repeal, Hospitals Will Feel Medicaid Changes the Most,” HFMA Weekly News, November 23, 2016)


Medicaid Block Grants


One of the most talked about replacements for Medicaid expansion remains shifting the state-federal public insurance program to a block grant, thereby allowing states to have wider spending discretion.


A key detail surrounding a Medicaid block grant is whether the funding would be set at current federal Medicaid spending levels or those from before the expansion started in 2013. Total Medicaid spending in FY15 hit $532 billion; about 62 percent of that was provided by the federal government. Even if the total block-grant funding is set at the current higher level, the financial impact on hospitals could worsen in future years if the annual spending increase is set far below medical inflation—as is the case in many such proposals. (“After ACA Repeal, Hospitals Will Feel Medicaid Changes the Most,” HFMA Weekly News, November 23, 2016)


In September the Rand Corporation published an analysis of the financial impact of an ACA repeal and replacement. It projected a repeal would increase the number of uninsured by 19.7 million, while a replacement that included Medicaid block grants would further boost the number of uninsured by 5.5 million.


Analysts note the hospitals most vulnerable to Medicaid cuts are:

  • Children’s hospitals
  • Safety net hospitals in urban areas


To read the Rand report, click here.




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