Uncompensated Care Costs Down $7.4 Billion Due to the ACA

On the fifth anniversary of the Affordable Care Act, HHS’ Office of the Assistant Secretary for Planning and Evaluation (ASPE) announced that healthcare reform was responsible for a $7.4 billion reduction in uncompensated care costs in 2014.

Medicaid expansion alone accounted for $5 billion of the total estimated $7.4 billion. The ASPE also expects uncompensated care costs will continue to fall substantially as a result of coverage expansions through Medicaid and the insurance marketplace.

The $7.4 billion reduction in uncompensated care breaks down to a $1.9 billion reduction in bad debt and $5.5 billion reduction in costs of charity care.

Shifting payor mix is also responsible for the drop in uncompensated care with volumes of uninsured and self-pay admissions down. However, these numbers are down more substantially in states that chose to expand Medicaid.

Emergency department visits among self-pay and uninsured patients also fell more in Medicaid expansion states.

“If non-expansion states, had proportionately as large increases in Medicaid coverage as did expansion states, their uncompensated care costs would have declined by an additional $1.4 billion,” according to the report.

ASPE determined that coverage expansions have reduced uncompensated care costs by $7.4 billion by estimating these costs would have been $34.7 billion had coverage in 2014 remained the same as in 2013. Instead, due to coverage gains, uncompensated care costs are down to $27.3 billion.

The new ASPE projections surpass the initial estimates. In September 2014, HHS had estimated that uncompensated care would fall $5.7 billion. However, a Supreme Court decision to strike down subsidies for individuals on the federal exchange could cost hospitals $12 billion in uncompensated care in 2016 as people lose insurance, according to a report from the Urban Institute.

A second ASPE report discussed Medicaid expansion in general, including the fact that state that chose not to expand Medicaid as of July 2014 reduced the country’s economic output by $66 billion through 2017. In addition, states that have commissioned reports on the results of their Medicaid expansion have almost universally shown job growth and positive economic impacts.