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Could Health Systems Pull Out of Non-Expansion States?

Not expanding Medicare may have ‘catastrophic’ effect, experts say

States’ decisions on Medicaid expansion have created “two separate and unequal health care systems in America,” and some observers worry that health systems could pull out of areas that did not expand Medicaid, according to an article in Modern Healthcare.

As part of efforts by the Patient Protection and Affordable Care Act (PPACA) to ensure health insurance coverage for all U.S. residents, the federal government this year began paying to expand Medicaid eligibility.

From 2014 to 2017, the feds will pay for 100% of the difference between a state’s previous Medicaid eligibility level and the PPACA minimum — 138% of the federal poverty limit. Federal contributions to the expansion will drop to 95% in 2017 and will remain at 90% after 2020.

However, the Supreme Court ruling on the law allowed states to opt out of the Medicaid expansion — which half of the states have chosen to do.

According to the article, the disparity between states that have decided to expand Medicaid and those that have not has essentially created two different health care systems in America.

In the states that expanded Medicaid, a growing percentage of the population is obtaining coverage, and hospital charity care levels are going down. For example, uncompensated care costs for the first half of the year at Willamette Valley Medical Center in Oregon — which has expanded its Medicaid program — have decreased by 51% compared with the same period in 2013.

In the other states, the uninsured rate remains high, and hospitals must continue to provide care to patients who cannot pay their bills — despite facing major decreases in safety-net hospital payments. At River Park Hospital in McMinnville, Tennessee, costs of uncompensated care for the first half of the year are up 1.8% over the same time last year.

Both Willamette Valley Medical Center and River Park Hospital are operated by Capella Healthcare, and the system says it is seeing the same trend across the country. Three out of the six states in which Capella operates have expanded Medicaid. Those states account for about 90% of the decline in the system’s self-pay revenue in the second quarter of 2014.

According to Capella executives, the increased rate of insured individuals has helped to cover hospital costs and freed up funds for other hospital priorities. Mark Medley, president of Capella’s hospital operations, said: “It’s hard to imagine a scenario where health status improves if people don’t have access to health care.”

Many hospital systems are urging their state legislatures to expand Medicaid if they have not yet done so.

Craig Becker of the Tennessee Hospital Association says some systems could move out of non-expansion states because of the financial struggles they might incur if they stay. Becker says that if states do not expand their programs, there could be “real catastrophic impact” for providers.

At the same time, some providers are concerned that the per capita health care costs for Medicaid beneficiaries are surging. In addition to a wave of new beneficiaries, experts say that newly insured individuals tended to have pent-up health needs that could strain hospital finances given the Medicaid program’s low reimbursement rates.

Source: Advisory Board Company; August 20, 2014.

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