Hospitals See Troubles In Red States That Snubbed Obamacare’s Medicaid Deal
Forbes, July 20, 2014
While record numbers of Americans sign up for the larger Medicaid health insurance program for the poor, financial issues are emerging for medical care providers in the two dozen states that didn’t go along with the expansion under the Affordable Care Act.
Reports out in the last week indicate the gap between those with health care coverage is widening between states that agreed to go along with the health law’s Medicaid expansion and those generally led by Republican legislatures and GOP governors that are balking at the expansion.
The moves against expansion are “beginning to hurt hospitals in states that opted out,” a report last week from Fitch Ratings said. The U.S. Department of Health and Human services has said Medicaid enrollment in the 26 states and the District of Columbia that agreed to go along with and implemented the expansion by the end of May “rose by 17 percent, while states that have not expanded reported only a 3 percent increase,” HHS said in an enrollment update for the Medicaid program.
“We expect providers in states that have chosen not to participate in expanded Medicaid eligibility to face increasing financial challenges in 2014 and beyond,” Fitch said in its July 16 report. “Nonprofit hospitals and healthcare systems in states that have expanded their Medicaid coverage under the Patient Protection and Affordable Care Act have begun to realize the benefit from increased insurance coverage.”
Already, the financial ratings agency said it has downgraded 10 health care entities so far this year and five of those were in states that have not gone along with the Medicaid expansion. Fitch didn’t specify the entities that have been hurt financially.
“Several of those downgrades were driven by operating performance declines related to funding and reimbursement pressures, which may have been lessened by Medicaid expansion,” the Fitch report said. “Conversely, of the nine upgrades since Jan. 1, eight were hospitals in states that have expanded Medicaid.”
The federal government traditionally picks up a little more than half of the cost of Medicaid. But funding under the health law is unlike past efforts to expand Medicaid in that the federal government will pick up the full tab for the first three years. The state gradually has to pick up some costs in 2017, but by 2020, the federal government is still picking up 90 percent or more of the Medicaid tab.
It’s an important issue for the health care industry. While the Fitch report examined nonprofit hospitals, for-profit hospitals, too, aren’t seeing growth in states where Medicaid hasn’t expanded.
Health plans, too, are seeing an uneven impact to their enrollment growth. An increasing number of state Medicaid programs are contracting with private health insurance companies like Aetna AET +0.74% (AET), Centene (CNC) Humana HUM +0.7% (HUM), Molina (MOH) and UnitedHealth Group UNH +1.19% (UNH).
“UnitedHealthcare is seeing significant and accelerating growth in Medicaid,” UnitedHealth president and chief executive officer Stephen Hemsley told analysts and investors last week on the company’s second quarter earnings call. “380,000 more people in the quarter and 635,000 through the first half of the year. Coming from expanded access to Medicaid in about half the states we serve, the launch of Florida’s planned Medicaid expansion, and core program growth from already established markets and programs.”
A report last week from the Robert Wood Johnson Foundation and the Urban Institute described the coverage difference as a “gulf in percentage of people without health insurance” that is growing larger between states that expanded Medicaid and those that did not.
As of June, the report said 60 percent of the nation’s uninsured residents live in states that did not expand Medicaid. That figure was up from 49.7 percent in September of last year.
Analysts expect that gap to only worsen. Unlike private coverage under the health law that is generally purchased during a specified open enrollment period, Americans can sign up for Medicaid at anytime.
“In states that expanded Medicaid, an estimated 71 percent of the uninsured likely qualify for some type of financial assistance for health insurance, compared with 44 percent of the uninsured in the states that did not expand Medicaid,” the Robert Wood Johnson Foundation and Urban Institute report said.