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Obamacare windfall: Big drop in uncompensated care

Obamacare giveth to hospitals, but not all states taketh what's on the table.

Hospitals last year saw a big cut in their costs from treating people who couldn't pay their bills—but the windfall was much larger in states that embraced a key Obamacare program, federal officials said Monday.

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Nationally, hospitals had a total of $27.3 billion in so-called uncompensated costs, which come from treating people who lack the means to pay for their care out of pocket or through insurance, the U.S. Health and Human Services Department said.

Doctor checking patient's blood pressure
Brenda Muller | Gallo Images | Getty Images

That was an estimated $7.4 billion, or 21 percent less, than the $34.7 billion in uncompensated costs that hospitals would have incurred if health coverage levels had remained at the levels seen in 2013, before Obamacare took full effect, the department said.

But most of those reduced costs—$5 billion—came in the 28 states and the District of Columbia that expanded their Medicaid programs to cover nearly all poor people. Hospitals in those states had a 26 percent reduction in uncompensated care spending, and realized 68 percent of the total savings, HHS said.

The remaining $2.4 billion in reduced uncompensated costs came in states that have tighter restrictions on who qualifies for Medicaid, which is jointly run by the federal government and states. Hospitals in nonexpansion states had a 16 percent reduction in uncompensated care costs, and realized 32 percent of the total savings.

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HHS said, "If nonexpansion states had proportionately as large increases in Medicaid coverage as did expansion states, their uncompensated care costs would have declined by an additional $1.4 billion."

The reduction in uncompensated care costs came in the first year to see the full effect of Obamacare's two major programs: the sale of often-subsidized private health insurance on government-run health exchanges, and the expansion of Medicaid to cover people who earn less than 138 percent of the federal poverty line. Last year was also the first that nearly all Americans were required to have some form of health coverage or be subject to a tax penalty.

Medicaid expansion was originally supposed to happen across the U.S., but a Supreme Court ruling in 2012 left the decision on whether to expand up to individual states.

About 6.7 million people were enrolled in Obamacare plans by the end of 2014. And last week, the government said that as of January, about 11.2 million additional people were enrolled in Medicaid compared to the average monthly enrollment in Medicaid seen in the month before the October 2013 launch of the Obamacare exchanges.

The report issued Monday by HHS noted there were substantial reductions in the volume of admissions of uninsured and self-paying patients in states that have expanded Medicaid, while in nonexpansion states those volumes "have fallen slightly." Such patients are responsible for a "major portion" of uncompensated care by hospitals, the department said. HHS also pointed out that a similar reduction in the proportions and volumes of emergency room admissions for uninsured/self-pay patients has primarily occurred in expansion states.

A chart included in the report showed that four major hospital systems—Community Health Systems, Hospital Corporation of America, LifePoint and Tenet—recorded increasingly sharp drops in the rate of uninsured/self-paying admissions over the course of last year.

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CHS saw the most dramatic decreases, with a 28 percent reduction in uninsured admissions in expansion states in the first quarter of 2014, and a 73 percent drop in the fourth quarter.

Ascension Health, the nation's largest nonprofit hospital operator and biggest Catholic health-care system, also has seen a windfall.

For the six-month period ended Dec. 31, 2014, "as compared to the same period in the prior year, bad debt expense decreased $50.5 million, or 7.7 percent, due to the expansion of coverage under the ACA as well as other factors," said Nick Ragone, chief communications officer at Ascension.

Both Medicaid expansion and the Obamacare exchanges have been credited with a significant reduction in the number of Americans without insurance since late 2013.

Last week, the federal government noted that Medicaid enrollments had increased by 26.1 percent in expansion states since the fall of 2013. In states that did not expand Medicaid, there was just a 7.8 percent increase in enrollment.

The government does not break down how many of the enrollments were from the newly eligible, and how many came from people who were previously eligible for Medicaid, but had not bothered to sign up beforehand.