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Uncompensated Care Costs Well Down in ACA Medicaid Expansion States

October 21, 2020 at 10:00 AM

Hospitals’ uncompensated health care costs, which fell significantly as the Affordable Care Act’s (ACA) major coverage expansions took effect, rose slightly in 2017 but remained well below their 2013 level, according to the latest data from the Medicaid and CHIP Payment and Access Commission — especially in states that adopted the ACA’s Medicaid expansion to low-income adults.

As a share of hospital operating expenses, uncompensated care costs in 2017 were 26 percent lower than in 2013, equating to more than $14 billion in savings in 2017 alone. While uncompensated care costs fell in all states, they fell much more in Medicaid expansion states: by 45 percent, on average, compared to 2 percent in non-expansion states (see table). Expansion states also saw much bigger gains in health coverage.

More generally, uncompensated costs fell more in states where uninsured rates fell more, with a roughly one-to-one relationship between the two. (See figure.) This indicates that the declines in uninsured rates drove the declines in uncompensated care costs.

When Uninsured Rate Falls, So Do Uncompensated Care Costs

Percent Change, 2013 to 2017

Note: The Affordable Care Act allows states to expand their Medicaid programs. Each bubble represents a state with the size of the bubble based on state population.

Source: CBPP analysis using MACPAC data on uncompensated care costs and Census Bureau data on uninsured rates by state. Note, each bubble represents a state with the size of the bubble based on state population.

The relationship between declines in the uninsured rate and uncompensated care was stronger in expansion states. That’s likely because Medicaid serves the most financially vulnerable people, who are least able to pay medical bills when uninsured, thus adding to hospitals’ uncompensated care costs.

Cutting uncompensated care costs helps patients, hospitals, and state budgets. Those costs: (1) lead to medical debt, which hospitals may seek to collect even from very low-income patients; (2) become part of patients’ credit history, reducing their access to loans; and (3) can sometimes cause people to declare bankruptcy. They also burden hospitals, making it harder for them to invest in new technologies or equipment, maintain needed capacity to serve patients, or even remain open. Finally, uncompensated care costs burden state budgets because many states cover part of these costs, at least for public hospitals and other safety net providers.

Although uncompensated care costs have fallen since 2013, both they and the uninsured rate rose slightly in 2017. And since 2017, the uninsured rate has risen further to 9.2 percent (from 8.7 percent in 2017), at least partly due to Trump Administration efforts to weaken health coverage programs. This rise in the uninsured rate will likely push up uncompensated care costs.

Meanwhile, the Administration continues to urge the Supreme Court to overturn the entire ACA, filing its latest brief in August. That would cause more than 20 million people to lose health insurance, almost certainly causing uncompensated care costs to spike.

Uncompensated Care Costs Fall as Uninsured Rate Falls
State Medicaid expansion status as of March 2017 Uncompensated Care Costs as Share of Hospital Budgets % Change in uninsured rate, 2013 to 2017
2013 2017 % change, 2013 to 2017 $ change,
2013 to 2017 (in millions, $2017)
United States   5.8% 4.3% -26% -14,089 -40%
Medicaid expansion states 31 5.1% 2.8% -45% -13,942 -49%
Non expansion states 20 7.3% 7.2% -2% -504 -28%
Alabama   6.7% 6.4% -4% -31 -31%
Alaska y 5.3% 3.5% -34% -34 -26%
Arizona y 6.7% 2.8% -58% -577 -41%
Arkansas y 6.3% 3.4% -46% -188 -51%
California y 5.3% 2.0% -62% -3,672 -58%
Colorado y 5.7% 2.5% -56% -464 -47%
Connecticut y 4.1% 3.3% -19% -84 -41%
Delaware y 3.1% 2.6% -16% -15 -41%
District of Columbia y 2.6% 2.2% -16% -16 -43%
Florida   8.9% 7.9% -11% -480 -36%
Georgia   8.4% 8.5% 2% 35 -29%
Idaho*   4.5% 4.0% -12% -27 -38%
Illinois y 6.0% 4.3% -28% -649 -46%
Indiana y 6.7% 4.0% -40% -600 -41%
Iowa y 4.9% 2.5% -49% -221 -42%
Kansas   3.8% 3.9% 2% 7 -29%
Kentucky y 6.6% 2.4% -64% -588 -62%
Louisiana y 7.1% 3.7% -48% -450 -49%
Maine*   4.7% 3.7% -22% -59 -28%
Maryland y 5.3% 3.3% -37% -304 -40%
Massachusetts y 2.5% 1.8% -29% -197 -24%
Michigan y 4.1% 1.7% -58% -764 -53%
Minnesota y 2.2% 1.7% -21% -87 -46%
Mississippi   7.9% 7.7% -3% -19 -30%
Missouri   5.7% 5.7% 1% 9 -30%
Montana y 5.0% 2.6% -48% -96 -48%
Nebraska*   5.1% 4.3% -15% -47 -27%
Nevada y 7.3% 3.8% -48% -207 -46%
New Hampshire y 6.1% 2.7% -55% -163 -46%
New Jersey y 6.3% 4.4% -30% -443 -42%
New Mexico y 8.1% 2.7% -66% -293 -51%
New York y 5.0% 3.6% -28% -1,029 -47%
North Carolina   6.8% 6.0% -11% -205 -31%
North Dakota y 3.5% 2.5% -29% -40 -28%
Ohio y 5.6% 3.2% -42% -896 -45%
Oklahoma   6.5% 7.1% 10% 63 -20%
Oregon y 5.4% 2.6% -52% -324 -54%
Pennsylvania y 3.2% 2.0% -38% -497 -43%
Rhode Island y 5.3% 1.9% -64% -124 -60%
South Carolina   9.3% 10.4% 12% 141 -30%
South Dakota   3.5% 2.8% -20% -28 -19%
Tennessee   5.6% 5.4% -3% -29 -32%
Texas   10.2% 10.5% 3% 208 -22%
Utah*   6.0% 5.7% -6% -24 -34%
Vermont y 2.4% 1.9% -20% -11 -36%
Virginia*   6.3% 7.4% 18% 220 -28%
Washington y 4.7% 2.4% -49% -467 -56%
West Virginia y 6.8% 2.9% -57% -252 -56%
Wisconsin   2.9% 2.1% -27% -156 -41%
Wyoming   7.2% 6.2% -13% -16 -8%

* These states have expanded Medicaid coverage to low-income adults since March 2017.

** For each state, this calculation reflects the 2013 to 2017 percentage point reduction in uncompensated care costs as a share of hospitals' total operating budgets applied to hospitals' 2017 total operating budgets.

Note. We do not include data for Hawaii because the 2017 uncompensated care cost estimates for the state seem unreliable.

Source. CBPP analysis of MACPAC estimates of uncompensated care costs in states, and Census Bureau estimates of uninsured rates in states.


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