The Affordable Care Act Medicaid expansion is helping hospitals reduce their debts:
Since the Affordable Care Act’s first open enrollment in 2013, the number of Americans covered under Medicaid has risen by 21 percent, to 71.1 million.
Nonprofit hospitals in the 30 states that expanded Medicaid reported on average 13 percent less bad debt from unpaid bills last year, according to Moody’s Investors Service. In contrast, according to Moody’s, such “hospitals in non-expansion states saw bad debt increase through much of the year.”
Hospitals in Medicaid expansion states, according to Kaiser, reported an average 32 percent decrease in uninsured patients and a 40 percent cut in unreimbursed costs of care for patients without the ability to pay, known in the industry as charity care costs. In non-expansion states, the number of uninsured patients declined by 4.4 percent and charity care costs dropped by 6.2 percent [Robin Respaut, “Some Public Hospitals Win, Others Lose with Obamacare,” Reuters via Yahoo News, 2015.07.23].
Less debt means more resources available for care. More debt or even the same amount of debt on one’s ledger makes it harder to compete for financing with other players who are reducing their debt. Such is the financing bind for hospitals in states like South Dakota that haven’t expanded Medicaid:
…[P]ublic hospitals in those states, many of which rely on bond markets for funding, are likely to feel the pinch even more acutely over time, experts said.
“Providers in these states are going to be at a disadvantage,” said Jim LeBuhn, senior director at Fitch Ratings. “It’s going to make it that much more challenging for these providers to maintain their financial profiles” [Respaut, 2015.07.23].
The link between Medicaid expansion and better financial performance isn’t rock-solid:
Moody’s says the decline in bad debt is credit positive, but hospitals in the expansion states have not comprehensively shifted this lessened exposure into higher cash flow, or materially better financial results than non-expansion states.
“A reduction in bad debt will not result in stronger margins by itself. Other factors, particularly the overall economic environment and hospitals’ ability to control other expenses, has a larger impact on financial performance, ” Steingart says [Moody’s Investor Service, “Affordable Care Act’s Medicaid Expansion Linked with Decline in US Hospitals’ Bad Debt,” Moodys.com, 2015.06.03].
…but hospitals in states expanding Medicaid have a financial opportunity that hospitals in non-expansion states do not.
Oh yeah, and they are helping more sick people get well.
Governor Dennis Daugaard thinks South Dakota’s credit rating is a big deal. But he apparently can’t expand Medicaid or his thinking to help South Dakota hospitals.