Medicaid expansion successfully reduced nonprofit hospital spending on uncompensated care—but that doesn’t mean they’re spending more on charity care, a new study shows.
Rather than freeing up funds at hospitals for increased spending on other charitable efforts to support community health—as the Affordable Care Act (ACA) intended when it expanded Medicaid—a new study found gains were instead used to offset a corresponding uptick in unreimbursed Medicaid expenses.
That the 2% decrease in spending on uncompensated care matches so closely with the reported 2% increase in spending for unreimbursed Medicaid care seems like an unlikely coincidence, according to the study’s lead author, Charles Stoecker, an associate professor at Tulane University’s School of Public Health and Tropical Medicine. The research was published in JAMA Network Open.
“Your intuition might tell you the hospital has some extra money, so where are they going to spend it? But what the hospitals are telling us is there’s actually no extra money and these perfectly cancel each other out, so it seems like there may be another mechanism that’s going on here,” he told FierceHealthcare.
Stoecker and his research team theorize that patients who were previously uninsured but newly covered by Medicaid should produce a net reduction in hospital expenses, because Medicaid covers a portion of the care they received prior to expansion.
Patients who were previously uninsured but did not bother to seek care prior to expansion could feasibly account for at least some of the shift. But those marginal expenses would presumably come with a marginal benefit since the hospital would also receive reimbursement for those patients.
Unfortunately, the available hospital data only shed light on the way hospitals allocate their expenses. Figuring out the marginal cost of each new Medicaid patient—and tracking exactly where any savings might actually end up going—will likely require a closer look at patient counts, Stoecker said. And there’s no convenient repository for that type of data set at the moment.
While it’s clear that current incentives for nonprofit status aren’t aligned appropriately to generate additional spending on charity care, Stoecker sees the study’s findings as the first step in a longer journey.
That journey begins with Republican Sen. Chuck Grassley’s insistence on putting a requirement in the ACA that hospitals must account for their spending on charity care in the first place as a way of validating their nonprofit status. Where it goes from here, however, remains an open question from a policy standpoint, in part because the information we currently have is still relatively new and difficult to interpret fully.
“Going back to what Chuck Grassley was thinking when he put this requirement in the ACA, the first step to implementing accountability is measurement. I think we’ve implemented measurement,” Stoecker said. “Now we’ve got researchers that are able to use those measures, and the first step is coming into light.”