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The effect of Affordable Care Act Medicaid expansion on hospital revenue

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  • Ali Moghtaderi
  • Jesse Pines
  • Mark Zocchi
  • Bernard Black

Abstract

Prior research has found that in states which expanded Medicaid under the Affordable Care Act, hospital Medicaid revenue rose sharply, and uncompensated care costs fell sharply, relative to hospitals in nonexpansion states. This suggests that Medicaid expansion may have been a boon for hospital revenue. We conduct a difference‐in‐differences analysis covering the first four expansion years (2014–2017) and confirm prior results for Medicaid revenue and uncompensated care cost, over this longer period. However, we find that hospitals in expansion states showed no significant relative gains in either total patient revenue or operating margins. Instead, the relative rise in Medicaid revenue was offset by relative declines in commercial insurance revenue. In subsample analyses, we find higher revenue and margins for rural hospitals in expansion states, little change for small urban hospitals, and a revenue decline for large urban hospitals.

Suggested Citation

  • Ali Moghtaderi & Jesse Pines & Mark Zocchi & Bernard Black, 2020. "The effect of Affordable Care Act Medicaid expansion on hospital revenue," Health Economics, John Wiley & Sons, Ltd., vol. 29(12), pages 1682-1704, December.
  • Handle: RePEc:wly:hlthec:v:29:y:2020:i:12:p:1682-1704
    DOI: 10.1002/hec.4157
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    References listed on IDEAS

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    1. Craig Garthwaite & Tal Gross & Matthew J. Notowidigdo, 2014. "Public Health Insurance, Labor Supply, and Employment Lock," The Quarterly Journal of Economics, Oxford University Press, vol. 129(2), pages 653-696.
    2. Kosali Simon & Aparna Soni & John Cawley, 2017. "The Impact of Health Insurance on Preventive Care and Health Behaviors: Evidence from the First Two Years of the ACA Medicaid Expansions," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 36(2), pages 390-417, March.
    3. Gruber, Jonathan & Simon, Kosali, 2008. "Crowd-out 10 years later: Have recent public insurance expansions crowded out private health insurance?," Journal of Health Economics, Elsevier, vol. 27(2), pages 201-217, March.
    4. Bernard Black & Alex Hollingsworth & Leticia Nunes & Kosali Simon, 2019. "Simulated Power Analyses for Observational Studies: An Application to the Affordable Care Act Medicaid Expansion," NBER Working Papers 25568, National Bureau of Economic Research, Inc.
    5. Wagner, Kathryn L., 2015. "Medicaid expansions for the working age disabled: Revisiting the crowd-out of private health insurance," Journal of Health Economics, Elsevier, vol. 40(C), pages 69-82.
    6. Jordan H. Rhodes & Thomas C. Buchmueller & Helen G. Levy & Sayeh S. Nikpay, 2020. "Heterogeneous Effects Of The Aca Medicaid Expansion On Hospital Financial Outcomes," Contemporary Economic Policy, Western Economic Association International, vol. 38(1), pages 81-93, January.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Chris Sampson’s journal round-up for 7th December 2020
      by Chris Sampson in The Academic Health Economists' Blog on 2020-12-07 12:00:03

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