Medicaid Expansion Fails to Promote Increased Community Benefit Spending in Nonprofit Hospitals

In nonprofit hospitals within states that expanded Medicaid, significant decreases in uncompensated care were reported, with additional increases in unreimbursed Medicaid expenses indicating that Medicaid expansion had no substantial effect on community benefit spending, according to study findings published today in JAMA Network Open.¹

In 2014, researchers note that the Patient Protection and Affordable Care Act allowed states to expand their Medicaid programs to cover individuals earning up to 138% of the federal poverty level, subsequently decreasing the number of uninsured citizens in those states.

Although the move promoted greater community benefit spending, with mean increases of $3.2 million per hospital being generated from Medicaid and Children’s Health Insurance Program revenue, nonprofit hospitals, which are tax-exempt, in Medicaid expansion states instead saw mean decreases of $2.8 million per hospital in the reported cost of uncompensated care in their first year after the expansion.

This issue was further highlighted in a recent research letter published in JAMA Internal Medicine,² where researchers found that for every $100 of net income, the top earning nonprofit hospitals devoted just $11.50 to charity care for uninsured individuals and $5.10 to free care for other low-income patients. In comparison, the lowest-earning hospitals gave $72.30 of every $100 of net income to charity care for uninsured persons and $40.90 to free care for other low-income patients.

In the study’s subanalysis stratified by state Medicaid expansion, hospitals that expanded Medicaid provided substantially less total charity care than other hospitals for every $100 of overall net income: $12.00 versus $37.80 (uninsured) and $8.70 versus $11.00 (insured).

Researchers of the current study sought to further examine the association of nonprofit hospital spending with community benefit and changes in uncompensated care after Medicaid expansion. The cohort study utilized a difference-in-differences analysis to estimate changes in reported charitable categories associated with Medicaid expansion in nonprofit hospitals (n = 2253), deriving data from Internal Revenue Service Form 990, Schedule H, tax filings for 2253 tax-exempt hospitals in the United States from 2012 to 2016. The data were analyzed from June to November 2019.

From 2012 to 2016, mean (SD) uncompensated care costs for nonprofit hospitals in Medicaid expanded states totaled $4.20 million ($8.80 million) and unreimbursed Medicaid expenses were $7.60 million ($18.62 million). Cmpared with nonprofit hospitals in states that did not expand Medicaid, hospitals in Medicaid expanded states reported mean reductions in their provision of uncompensated care of $1.11 million (95% CI, $0.35 million-$1.87 million; P <.001), representing a mean change of −2% (95% CI, −6% to 2%; P <.001).

Additionally, these reductions in uncompensated care were followed by mean reported increases in the provision of unreimbursed Medicaid expenses of $1.63 million (95% CI, $0.31 million-$2.94 million; P = .02), representing a mean increase of 2% (95% CI, 1%-4%; P = .01).

These statistics indicate that while nonprofit hospitals received greater income from Medicaid expansion, no significant changes to community benefit spending occurred.

References

1. Stoecker C, Demosthenidy M, Shao Y, Long H. Association of nonprofit hospitals’ charitable activities with unreimbursed Medicaid care after Medicaid expansion [published online February 26, 2020]. JAMA Netw Open. doi: 10.1001/jamanetworkopen.2020.0012.
2. Bai G, Yehia F, Anderson GF. Charity care provision by US nonprofit hospitals [published online February 17, 2020]. JAMA Intern Med. doi: 10.1001/jamainternmed.2019.7415.