Expanding Medicaid in Alabama would double hospitals' Medicaid revenue shortfalls, the equivalent of about 5,160 hospital jobs.
Alabama is one of 10 red states that haven’t expanded Medicaid through the Affordable Care Act yet. Some Alabama lawmakers are now reportedly considering the idea.
According to a recent report by the conservative Foundation for Government Accountability, Medicaid expansion in Alabama would lead to hospitals being saddled with an additional $319 million in Medicaid shortfalls.
“Enrollment of able-bodied adults through Medicaid expansion has shattered projections. Since the Medicaid payment rate is lower than a hospital’s cost of service, this has driven down hospital profits by increasing the Medicaid shortfall. This shortfall is contributing to hospital closures and increasing price pressures on countless others,” Hayden Dublois and Michael Greibrok, the report’s authors, wrote. “This evidence is clear that any further expansion would only harm the bottom lines of more hospitals by doubling the Medicaid shortfall in any state that chooses to expand. States that have not expanded should continue to avoid the Medicaid trap and those that have expanded should roll it back.”
Dublois and Greibrok continued, “Hospitals in expansion states were in better financial shape before they expanded—but this has since flipped. It is not a case where hospitals in expansion states were facing financial difficulties before expansion that have simply continued. It is also not just a bad time for hospitals overall, because both profits and profit margins have increased for hospitals in non-expansion states.”
“The reason for this flip in financial stability in expansion states is that hospitals count on private payers to make up for the reduced payments provided by Medicaid. In non-expansion states, private payers averaged payments of 128 percent of hospital costs, whereas Medicaid averaged only 76 percent of costs,” they added. “As a higher proportion of hospital services are billed to Medicaid because of expansion, there are not enough private payments to boost back profits. This is especially true in rural areas without a large patient base to draw from. Thankfully, as non-expansion states have resisted calls to expand, they have not suffered from this shift in payers from private insurance to Medicaid as expansion states have.”
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