Study: Michigan hospitals are saving money thanks to the state's Medicaid expansion

Aug 16, 2017

Michigan’s Medicaid expansion is good for hospitals' bottom line and for the people using it, according to a recent study.

The Center for Healthcare Research and Transformation (CHRT) found that between 2013 and 2015, Michigan hospitals decreased uncompensated care costs by 56 percent. Nationwide, that figure was 23 percent. Uncompensated care is the amount of care a hospital provides but never gets fully reimbursed for.

In 2013, Michigan hospitals were spending $903 million in non-refunded care costs.

The state launched its Medicaid expansion program Healthy Michigan in April 2014. By 2015, hospitals were spending only $394 million. Under the expansion of the state-federal health insurance program, the federal government pays most of the cost for more people to be covered.

Megan Foster Friedman is a health care analyst with CHRT, and a co-author of the study. She says because more Michigan residents have health insurance, hospitals can collect more money for the care they provide.

“And that in the end helps everyone who has insurance, because they’re able to get more payments in and then don’t pass along uncompensated care costs to other consumers,” Friedman said.

Because of the Trump administration’s desire to repeal the Affordable Care Act (ACA), health care could look very different in the near future. This includes states with Medicaid expansions.

On average, states that expanded Medicaid saw a 39 percent decrease in these costs. The states that did not only saw a 4 percent decrease. By the end of 2015, 21 states had not expanded Medicaid under the ACA, and before the expansion, health care providers gave about $1,000 of uncompensated care per individual. Hospitals in non-expansion states spent $3 billion more in uncompensated care in 2015 than hospitals in states that expanded the program.

“Any potential changes to the structure of the Medicaid program or future funding for the Medicaid program would have a pretty large impact on hospital finances and uncompensated care costs,” Friedman said.