The Effect of ACA Medicaid Expansion on Hospital Revenue

Abstract

Prior research has found that in states which expanded Medicaid under the Affordable Care Act, hospital Medicaid revenue rose sharply, and uncompensated care costs fell sharply, relative to hospitals in non-expansion states. This suggests that Medicaid expansion may have been a boon for hospital revenue. We conduct a difference-in-differences analysis covering the first four expansion years (2014-2017) and confirm prior results for Medicaid revenue and uncompensated care cost, over this longer period. However, we find that hospitals in expansion states showed no significant relative gains in either total patient revenue or operating margins. Instead, the relative rise in Medicaid revenue was offset by relative declines in commercial insurance revenue. In subsample analyses, we find higher revenue and margins for rural hospitals in expansion states, little change for small urban hospitals, and a revenue decline for large urban hospitals.

Note: The Online Appendix for this paper is available at http://ssrn.com/abstract=3416187.

Keywords: ACA Medicaid Expansion, Hospital Revenue, Hospital Unpaid Care Cost