Study: Medicaid expansion would provide relief to North Carolina hospitals strained by COVID-19

With overworked staff, limited inpatient beds and high demand, many hospitals in North Carolina and nationwide have been pushed to capacity as they struggle to accommodate COVID-19 patients. Despite the increased demand, however, many hospitals face unprecedented financial challenges because of the growing number of uninsured individuals .

A recent study published in Health Affairs examines how expanding Medicaid could affect the financial stability of a state’s hospitals during the pandemic. By comparing hospital finances before and after Medicaid expansion (FY 2011-2017), researchers analyzed the impacts of the Affordable Care Act on uncompensated care costs — these occur when a hospital provides care and does not receive any payment from the patient or insurer – as well as Medicaid reimbursements and operating margins.

The study found that hospitals in expansion states reported greater financial stability than hospitals in non-expansion states. Below are several highlights from the study:

  • Hospitals in expansion states saw a large decline in uncompensated care costs while hospitals in non-expansion states saw an increase in uncompensated costs during the study period.
  • Hospitals in states that expanded Medicaid in 2014 reported an average decline of $6.4 million  in uncompensated care costs during the study period, representing a 53% decline relative to FY 2011-2013.
  • Hospitals in expansion states had an increase in Medicaid reimbursements, while hospitals in non-expansion states saw their Medicaid reimbursements stagnate.
  • The early financial gains of hospitals in expansion states were sustained through 2017, suggesting that the fiscal benefits of Medicaid expansion are long-lasting.

While this study did not examine hospital finances during the pandemic, its findings suggests that hospitals in expansion states entered the COVID-19 crisis on stronger footing than hospitals in non-expansion states and are more resilient.

Medicaid expansion would extend relief to all hospitals in North Carolina, but particularly to hospitals in rural parts of the state. Since 2014, six rural hospitals have closed and many more remain vulnerable to closure because of financial challenges. This study supports prior research demonstrating the positive effects of Medicaid expansion on hospital finances and, by extension, rural communities who rely on hospitals for health care and jobs.

During the worst public health crisis in a century, over a million North Carolinians are uninsured. Medicaid expansion would provide coverage for more than 500,000 low-income North Carolinians. Prior to the pandemic, North Carolina had an uninsured rate of 11.3%, well above the national uninsured rate of 9.2%. Research shows that closing the coverage gap would help narrow racial and ethnic health disparities. This is especially important for low-income communities of color that disproportionately have occupations that put them at higher risk of COVID-19 exposure and have higher rates of chronic health conditions.

In addition, new analysis of a congressional proposal for COVID relief shows that North Carolina would stand to benefit from an increase of the existing federal share of Medicaid costs to the tune of $2.4 billion. This provision aims to address a concern often raised by opponents of Medicaid expansion despite findings showing state budget savings in addition to health insurance coverage gains.

The COVID-19 pandemic wears on while the choices of lawmakers to reject Medicaid expansion continues to harm North Carolinians, hospitals, and communities.

Keven White is an MSW intern at the Budget & Tax Center, a project of the North Carolina Justice Center.

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