Medicaid expansion: An answer to uncompensated care?

July 10, 2013

Medicaid expansion could save physicians and hospitals billions in uncompensated care costs. Yet fewer than half the states have agreed to increase their participation thresholds after challenging the expansion mandate before the Supreme Court last year.

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Medicaid expansion could save physicians and hospitals billions in uncompensated care costs. Yet fewer than half the states have agreed to increase their participation thresholds after challenging the expansion mandate before the Supreme Court last year.

A provision in the Affordable Care Act (ACA) expands Medicaid coverage for most low-income adults to 138% of the federal poverty level. Currently, states set the bar on who can qualify for Medicaid, and it varies widely from state to state, with thresholds ranging from about 50% of the federal poverty level to 100%.

The provision was included in the ACA as a compulsory change, but a legal challenge resulted in a 2012 Supreme Court ruling that left the decision on Medicaid coverage expansion to individual states. As of late June, 26 states had  decided to participate in expansion, 13 were not participating, and the rest were  undecided or pursuing alternative approaches.

The goal of the expansion, while it will likely increase the number of people who will qualify for Medicaid and therefore increase the burden on the already expensive program, is to reduce the number of uninsured Americans, which would in turn reduce the amount of uncompensated care that must be provided by physicians, and to create an even playing field in terms of who qualifies for Medicaid across the nation. Analysts like those at the Kaiser Family Foundation say overall state costs of implementing the Medicaid expansion would likely be less than the additional federal funds they would qualify for by participating in the expansion program. Some states, according to Kaiser, may actually see some savings.

However, studies indicate that Medicaid beneficiaries typically have higher rates of emergency department visits, which may reflect problems in accessing traditional care routes. Providers are less likely to accept patients with Medicaid compared to patients with private insurance-especially specialists, according to Kaiser. The ACA has attempted to increase the level of physician participation in Medicaid by temporarily offering increased payment rates to primary care physicians but, again, the increase is only temporary and does not apply to specialists. Moreover, payment rates are only one reason physicians may choose not to participate in Medicaid-participation in the program requires physicians to meet a number of additional benchmarks and regulations.

Medicaid expansion would increase overall state spending by more than $76 billion by 2022 (3%), while federal spending would increase by $952 billion (26%), according to a recent Kaiser report. The spending would be spread over an estimated 21.3 million new enrollees by 2022-a 41% jump compared to predictions in the ACA, says Kaiser, adding that Medicaid expansion coupled with other ACA provisions is expected to decrease the number of uninsured Americans by 48%. If no states were to agree to the expansion, Medicaid enrollment would rise by only 5.7 million, but the number of uninsured individuals would drop by only 28%, Kaiser notes. Kaiser estimates that physicians and other healthcare providers could save $183 billion between 2013 and 2022 if every state adopted the Medicaid expansion program.