The effect of medicaid expansion on hospital finances: evidence from Washington and Idaho.

Abstract

The study aims to analyze the impact of Medicaid Expansion on hospital finances. Medicaid eligibility may increase hospital reimbursements and lower uncompensated care costs if patients are moving from no insurance coverage to Medicaid. However, if patients taking up Medicaid are moving from a private insurance plan to Medicaid, then it is also possible that hospital reimbursements may be lower under Medicaid expansion. Medicaid expansion increased the eligibility for Medicaid coverage to a broader group of people and raised the income threshold to 138% of the federal poverty level. Some states chose to expand Medicaid while others did not. Using a natural experiment, I compare hospital revenues and uncompensated care costs in Eastern Washington, which chose to expand Medicaid in 2014, and in Idaho, which chose not to expand until 2020. Medicaid expansion may be associated with lower net revenues, higher Medicaid received, and lower uncompensated care costs per hospital bed, ceteris paribus. I find no significant impact on operating margins. This study adds to the current literature looking at Medicaid Expansion and hospital finances by looking at a different region than has been previously studied. This region offers similar demographic and economic situations in both states. These areas are more rural areas and have less populated cities, which allows for a unique perspective and contributes to the understanding of how Medicaid Expansion may impact hospital finances.