WV Center on Budget and Policy > Blog > Family Economic Security > Hospitals Need Medicaid Expansion to Reduce Costs

Hospitals Need Medicaid Expansion to Reduce Costs

Hospitals in West Virginia will face higher costs if the state fails to expand Medicaid to 130,000 low-income West Virginians under the Affordable Care Act. According to a recent study by John Graves in the New England Journal of Medicine, hospitals will see a reduction in federal Disproportionate Share Hospital (DSH or “dish”) payments that provide hospitals with partial reimbursements to cover uncompensated care given to low-income and uninsured patients. According to the American Hospital Association, in 2010 uncompensated care costs hospitals about $39 billion or 6 percent of their operating costs.

Under the current DSH formula, West Virginia hospitals would receive about $158 per-patient-per day from 2014 to 2020. However, under the ACA, this drops by $25 if West Virginia forgoes Medicaid expansion. While the state will see a reduction of $47 per-patient-per day if the Mountain State fully expands Medicaid according to Graves, this reduction will have only a small impact on hospitals. This is because most of the uncompensated costs of hospitals is due to low-income patients that do not have health insurance. By expanding Medicaid to 130,000 low-income uninsured patients, a good chunk of the hospitals’ uncompensated costs will disappear.

If West Virginia fails to expand Medicaid, uncompensated care costs at hospitals will likely grow at the same time that DSH cuts occur. If this happens, hospitals will likely provide less uncompensated care or they will shift costs onto everyone else. If West Virginia adopts expansion, this would end covering more than half of the state’s uninsured citizens and help offset the reduction in DSH funds.

If the Governor is looking for another reason to adopt Medicaid expansion, the unintended cuts for hospitals that provide uncompensated care may provide the cover he needs to get on board.

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