Association for Public Policy Analysis & Management

Although studies document the beneficial impact of the Affordable Care Act Medicaid expansions on hospital finances, there is less known on the impact from Marketplace coverage. One reason that Medicaid expansions may differentially affect hospital finances compared to Marketplace expansions is that Medicaid has retroactive and presumptive eligibility practices, which allow hospitals and other providers to be paid even if the patient was not already enrolled in coverage at the time of service.

In this paper, we connect the financial performance of hospitals to local growth in both Medicaid and Marketplace insurance take-up, reasoning that the presumptive/retroactive eligibility under Medicaid acts retrospectively to collect payments of the eligible uninsured. We compare hospital level finances (operating margin, bad debt and uncompensated care cost) across geographical locations with different growth rates of Marketplace and Medicaid take-up. Our data come from Health Care Cost Report Information System 2010-2016, Small Area Health Insurance Estimate (SAHIE) 2014-2016 and Marketplace Open Enrollment Period Public Use Files 2014-2016. Our method resembles a triple-difference approach, where we hypothesize that hospitals located in geographical regions with similar number of new enrollees in both Medicaid and the Marketplaces see a significant difference in hospitals finances, possibly because of the retrospectivity of Medicaid payment. We employ measure at different levels of granularity (hospital referred region, county and 5-digit ZIP code) that allows increasing level of variation in the health insurance enrollment via both Medicaid and the Marketplaces

Our preliminary findings using hospital referral regions as the geographical unit for measuring enrollment growth of both Medicaid and Marketplace provides little evidence to support our hypothesis. Despite the overall increase of 36% in operating margin and 11% decrease in bad debt ratio after the ACA observed in hospitals in our sample, due to power issue, we find insignificant differences in hospital finances between hospitals operating in referral regions with high Medicaid gain and those in regions with similar level of Marketplace enrollment growth. In continuing work, we will differentiate hospital finances using the take-up rate at county and ZIP-code levels, which possesses larger variations.

Our contribution is two-fold. First, several states are currently revisiting their Medicaid retroactive coverage policies, thus increasing the policy relevance of this work. Second, the differences between Medicaid and private insurance in terms of financial protection may depend on the way that retroactive/presumptive eligibility is determined, thus our work on hospital finances may be relevant for other research on the financial protection of health insurance policy.