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$5.7 Billion Drop in Hospital's Uncompensated Care Costs Due to ACA

September 25, 2014
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The Affordable Care Act (ACA) has made individual health insurance easier to obtain and more affordable. With more Americans covered in 2014 due to the ACA, there have been significantly less uncompensated care costs (UCC) for hospitals nationwide. A recent report by the Department of Health and Human Services (HHS) estimates that hospital UCC will be $5.7 billion lower in 2014 than they otherwise would have been, due to the decrease in uninsured individuals.

Drop in Uninsurance Rate Due to the ACA

The Congressional Budget Office originally predicted that 6 million Americans would be covered by the health insurance Marketplace in 2014. In a recent announcement from the Centers for Medicare and Medicaid Services, 7.3 million Americans are currently enrolled in individual health insurance through the Marketplace.

The ACA has allowed many previously uninsured Americans to obtain guaranteed-issue, affordable health insurance coverage. In fact, a recent survey conducted by the Kaiser Family Foundation found that 57 percent of Marketplace enrollees were previously uninsured.

A recent analysis by the Urban Institute Health Policy Center attributed the increase of insured Americans to two main factors: Medicaid expansion and premium tax credits.

The analysis pointed out that the states that expanded Medicaid had significant declines in their uninsurance rates through June 2014. States with Medicaid expansion saw their uninsured rate decline 6.1 percentage points, while non-expansion states only saw a drop of 1.7 percentage points.

In addition, Insurance coverage for middle-income households increased by 5.3 percent. According to the analysis, these middle-income households were targeted by the premium tax credits.

Coverage Expansion Means Less Uncompensated Care Costs for Hospitals

The HHS reported that initial projectections suggest UCC will fall by $5.7 billion in 2014, due to the major insurance coverage expansion. This represents a 16 percent reduction from baseline UCC spending.

The report attributes the decrease in UCC to coverage expansion through both Medicaid and the health insurance Marketplaces. There was an estimated 10.3 million decrease in the total number of uninsured, and an estimated 8 million more individuals covered by Medicaid, according to the HHS report.

The decrease in hospital UCC was attributed to the increase in insurance coverage, which decreased the proportion of hospitals’ volume of uninsured patients. The HHS used data from hospital earnings from Q1 and Q2 in 2014 for five large for-profit hospital operators throughout the United States.

As shown in the chart below, overall, hospitals tended to see relative reductions in their numbers of uninsured patients between Q1 of 2013 and Q1 2014. In Medicaid expansion states, hospitals saw significant declines in their rates of admissions for uninsured individuals.change_in_uninsured_hospital_admissions

Chart: The Department of Health and Human Services

As seen in the chart below, the declines in admissions of uninsured individuals were even more substantial between Q1 2013 and Q2 2014. The declines in their volumes of uninsured admissions ranged from 15 to 34 percent, overall. Hospitals in Medicaid expansion states saw an even greater decline, between 48 percent and 72 percent.change_in_uninsured_admissions_2

Chart: The Department of Health and Human Services

Read the full report from The Department of Health and Human Services

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