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June 10, 2016

ACA Medicaid Expansion Reduced Uninsured Hospital Stays in 2014

By Chichun Fang

Hospital bed 'What happens if previously uninsured people gain health insurance coverage?' is a question of great interest to social science researchers, policy makers, and the general public. Ideally, we would like to study this question in a randomized controlled trial (RCT) setting, where health insurance coverage is randomly assigned to a randomly selected population. Assuming that those who are assigned coverage are otherwise the same as those who are not assigned coverage, we can compare the subsequent behavioral and health outcomes of those covered to those who are not, and whether/how such differences affect the health care system. Unfortunately, except for the famous RAND Health Insurance Experiment, this ideal research setting is rarely feasible.

The enactment of Affordable Care Act (ACA) provides a 'quasi-experiment' setting that is considered next-best to a RCT. The ACA facilitates health insurance coverage expansion through two channels, health insurance exchanges and Medicaid expansion, which has resulted in twenty million Americans gaining health insurance coverage since the beginning of 2014. While health insurance exchanges are available in all 50 states, not all states chose to expand Medicaid coverage after the onset of ACA. Had there been no Medicaid expansion, the outcomes among the 'expansion states' should have followed the same trends as those in the 'non-expansion' states. But, because some states did expand Medicaid while others did not, a comparison of trends is now possible.

In a recent paper, Professor Helen Levy and her colleagues relied on this strategy to study how Medicaid expansion affected hospital stays. Depending on the insurance status of the patients, non-Medicare adult inpatient discharges were grouped in three categories: private insurance, Medicaid, and uninsured. Professor Levy and colleagues then compared how the shares of these three categories ('payer mix') changed in expansion states versus non-expansion states after the onset of Medicaid expansion.

They found that, among the expansion states, the proportion of Medicaid hospital stays increased, uninsured stays decreased, and stays paid with private insurance remained roughly unchanged. Among the non-expansion states, there was no statistically significant change in the payer mix. Using the differences in these trends across expansion and non-expansion states, Professor Levy and her colleagues concluded that the Medicaid expansion increased the share of Medicaid hospital stays by 6.2%, while it decreased the share of uninsured stays by 8.6% between the third quarter of 2013 and the second quarter of 2014.

An important implication of their result is that the Medicaid expansion may help to suppress the cost of uncompensated care, which in recent years has amounted to more than $40 billion annually, equivalent to about 6% of total U.S. hospital expenses. Hospitals have either taken the loss or shifted the burden to those who could afford to pay, which eventually led to higher health insurance premiums. Since uncompensated care often arises when patients do not have health insurance and cannot afford to pay for the cost of services, the shift from uninsured to Medicaid hospital stays is likely to alleviate the problem of uncompensated care.