Medicaid Work Rules to Increase Uncompensated Care Costs for Hospitals, Report Says

Medicaid work requirements will increase uncompensated care costs for hospitals, a research institute said Wednesday.

The Center for Budget and Policy Priorities (CBPP) said the nationwide uninsured rate dropped 35%, from 14.5% in 2013 to 9.4% in 2015. During that same timeframe, there was a corresponding 30% decline of uncompensated care costs as a share of hospital operating expenses in all but 2 states.

Declines were larger in expansion states, where uncompensated care costs fell by about half. In 10 expansion states where uninsured rates dropped the most, uncompensated care costs fell by 57% on average.

The CBPP, which produces research reports on budget policies that affect low-income Americans, credits the Affordable Care Act (ACA) for these results and said gains will be jeopardized once Medicaid work requirements take effect. Medicaid serves the most financially vulnerable, low-income patients who are least likely able to pay medical bills when uninsured, thus leading to hospital uncompensated care costs, the CBPP said.

If not paid for by Medicaid, uncompensated care must still be reflected somewhere, and if not paid for by the patient (leading to poor credit and medical debt or bankruptcy), uncompensated care makes it harder for hospitals to invest or upgrade facilities.

It also gets reflected in state budgets, since many states cover a portion of these costs, usually for public hospitals and safety net providers. The CBPP cited Medicaid expansion as creating savings in Arkansas, Louisiana, Kentucky, Michigan, and elsewhere, partly because of reduced uncompensated care. This happened as demand for state-funded health programs that serve the uninsured, including payments to hospitals to cover uncompensated care, has dropped, providing net savings.

As examples, the CBPP used Louisiana, which saved $199 million in the first fiscal year of its expansion and is projected to save an additional $350 million in the current fiscal year, and Colorado, which is expected to produce $134 million in net savings through 2026 by expanding Medicaid.

The report also cited the effect on rural hospitals in expansion states. The CBPP said rural hospitals increased their operating margins by 4 percentage points more between 2013 and 2015 and their total margins by 2.3 percentage points more than rural hospitals in nonexpansion states.

The report also cited the effect of eliminating retroactive Medicaid coverage, a feature of the program since 1972. Retroactive coverage allows hospitals and safety net providers to get paid for the care they provide for patients who incurred medical costs up to 3 months before enrolling if they were eligible during that 3 months. Indiana, Kentucky, and New Hampshire are eliminating retroactive coverage, while Arizona is planning on eliminating it and Iowa already has.

In another report released Wednesday, the CBPP said the new requirements will cause eligible people to lose benefits as a result of errors in documentation, confusing and time-consuming paperwork, and the problem of low-wage workers who are unable to compile enough hours to satisfy the requirements due to unstable hours or other factors beyond their control.

The new rules will require states to commit millions of dollars to build new bureaucracies and shift them away from providing care, the CBPP said.