Spending on charity care stalled as Medicaid expanded

A new study shows increased coverage for lower-income patients did not lead to more community benefit spending from hospitals between 2011 and 2017.

In the years following the enactment of the Affordable Care Act (ACA), nonprofit hospitals across the country benefited from the expansion of state Medicaid programs, which alleviated financial stresses from previously uninsured patients. However, while many experts hoped that hospitals would directly invest these savings into their communities, the growth in funds from Medicaid expansion did not translate into greater community benefit spending, according to a JAMA Network Open study from health policy researchers at Penn Medicine and PolicyLab at Children’s Hospital of Philadelphia (CHOP). 

Stethoscope laying on top of financial spreadsheets

“We know that Medicaid expansion helps lift financial burdens that hospitals face, but it wasn’t clear if those savings were being redirected back into the community because of it,” says first author Genevieve P. Kanter, an economist and assistant professor of medicine, medical ethics, and health policy in the Perelman School of Medicine. “Surprisingly, that’s not what we observed after reviewing the publicly available tax documents for more than 1,600 nonprofit hospitals. As these state programs rolled out, we saw the relief from the expansion led to either no change or a decline in direct community spending.”

To better understand community benefit spending, the researchers analyzed hospital IRS-reported changes in different types of community benefit spending between 2011 and 2017, which represents a period before and after enactment of the Affordable Care Act and its associated expansion of Medicaid coverage. 

For 1,666 hospitals, the researchers compared community benefit spending in states that expanded Medicaid with states that did not. The team found that Medicaid expansion was associated with a decrease in overall spending on charity care and subsidized care.

This story is by Lauren Ingeno. Read more at Penn Medicine News.