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, Medicaid revenue rose sharply and uncompensated care costs fell sharply, relative to non-expansion states. The implication is that Medicaid expansion was a boon to hospitals. We conduct a difference-in-differences analysis covering the first four expansion years (2014-2017), confirm these prior results, but show that hospitals in expansion states did not gain in either total revenue or patient revenue, relative to hospitals in non-expansion states. Instead the relative rise in Medicaid revenue was offset by a relative decline other non-government revenue (principally from commercial insurance). Even expansion-state hospitals which in 2013 were in the top decile for Medicaid discharges/total discharges, or proportion of uninsured patients, did not gain revenue, relative to similar hospitals in non-expansion states. We also provide evidence that prior results showing a large relative drop in unpaid care cost are driven by apparently bad data.

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