Does Medicaid Expansion Help Or Hurt Hospital Finances? – Analysis
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In debates over health care policy, one of the arguments against expanding access to health insurance is that this leads to increased utilization of emergency rooms – a phenomenon that would create serious problems for hospitals. But a review of the available research suggests that provisions in the Affordable Care Act that broadened access to insurance are not creating these problems – and in fact, states that did not take advantage of Medicaid expansion are more likely to see increases in uncompensated care costs for hospitals.
Introduction
Prior to the expansion of health insurance coverage in the Affordable Care Act (ACA), people with insurance (whether commercial insurance or Medicaid coverage) were the groups with similar and highest shares of Emergency Department (ED) visits. People without insurance made much less use of EDs. They were discouraged from seeking health care in an ED in all but the most dire circumstances by their concerns about the cost of such care. Knowing that they could not afford to pay for care, they reasonably expected the unpaid medical debt to affect their credit reports and to interfere with their ability to rent an apartment or get a job. They also expected the unpaid debt to be sold to a collection agency and to be hounded and harassed as the agency pursued them for payment.
This limited their use of ED visits for true emergency health conditions — like spiking blood pressure that could lead to a stroke if untreated, or a deep gash from a cooking accident that required immediate medical attention. In contrast, people with commercial insurance or Medicaid coverage knew that insurance would pay the ED bill and they would be responsible only for the copay, which would be waived if the patient was admitted to the hospital.
Research examining ED use in the period following the ACA’s voluntary Medicaid expansion to the near-poor, who previously lacked health insurance, finds an increase in ED visits by the newly insured. This, however, need not be a negative for hospitals if hospital net revenue increased as a result of this population being covered by insurance and if the costs of uncompensated care went down due to the decrease in patients without insurance who would be unable to pay for care.
In this issue brief, we examine what happened to ED usage following Medicaid expansion as well as the effect on hospital finances.
Emergency Department (ED) Utilization
National Studies
National studies generally focused on ED utilization trends for people under age 65 that occurred before and after several provisions of the ACA went into effect, particularly state‑level expansions of Medicaid eligibility.1 Prior to these expansions, the highest shares of usage occurred among patients with private insurance or Medicaid access.2
Following Medicaid expansion, the highest shares of ED visits occurred among patients with Medicaid access, while the proportions of visits by uninsured patients declined. The sharpest changes in the insurance status of ED visitors happened during the first two to three years after a state expanded Medicaid coverage.3 Among the different types of insurance sources evaluated (private insurance, Medicaid, no insurance, and Medicare), the percentages of ED visits by patients with Medicaid as their primary insurance source were higher than those with private insurance, no insurance or Medicare access. ED visits among the uninsured declined following Medicaid expansion.
State Studies
Studies of ED utilization trends among states featured similar investigations of ED visits before and after major ACA provisions took effect. States that expanded Medicaid were typically compared to states that did not. Medicaid expansion was found to increase Medicaid’s overall share of ED visits and reduce the share of uninsured ED visits in several Medicaid expansion states.4 Moreover, the largest increases in shares of Medicaid ED visits occurred among states with the highest increases in Medicaid enrollment, especially among enrollees who were previously uninsured.5 Conversely, private insurance shares of ED visits typically decreased in Medicaid expansion states.
Low‑Acuity, Non‑Urgent, and Preventable ED Utilization
Findings are mixed regarding the role that Medicaid expansion plays in reducing the volume of ED visits for care that can otherwise happen through a regular doctor visit. Studies have found, for example, that in some cases recipients may receive care from a doctor prior to requiring care in an emergency department.6 Some researchers speculate that less medically urgent conditions are potential factors for increases in ED visits due to the Medicaid expansions, but do not claim that it is a causal factor.7
Uncompensated ED Costs
National Studies
Several early national studies utilized data from the Centers for Medicare and Medicaid Services (CMS) and Internal Revenue Service (IRS) to estimate hospitals’ uncompensated care costs as a share of total hospital costs in ACA Medicaid expansion versus non‑expansion states, before and after expansion was available. This research finds that states that expanded Medicaid coverage saw reductions in their uncompensated care burdens.
From CMS data, one study found that among expansion states, uncompensated care costs were reduced from 4.1 to 3.1 percent of total operating costs of hospitals between 2011–2014.8 Extending this study to include 2015, the same authors found that between 2013 and 2015, uncompensated care costs were lowered from 3.9 percent to 2.3 percent of operating costs, resulting in estimated savings of approximately $6.2 billion.9 Between 2011–2015, another study found that these costs were reduced by 1.5 percentage points (a 28 percent reduction overall).10 A third study using CMS data from 2011–2017 estimated a decline of 2.6 percentage points in average uncompensated care costs as a percentage of total expenses from 2013–2017, relative to the study’s 2011–13 pre‑Medicaid expansion period.11 This study also found that average annual Medicaid revenue as a percentage of total revenue rose by 2.5 percentage points between 2013–2017 among hospitals in Medicaid expansion states, while Medicaid revenue remained relatively unchanged among hospitals in non‑expansion states.
Similarly, a study using IRS data from 2010–2014 found that “net effect” hospital costs (the combined costs for uncompensated care and Medicaid payment shortfalls) fell by 1.6 percentage points among expansion states compared to non-expansion states, amounting to uncompensated care costs savings of 21 percent.12 Another IRS study found that through September 2020, uncompensated care costs in Medicaid expansion states were around 2.7 percent of all operating expenses, versus 7.3 percent for non‑expansion states.13
Studies also investigated the locations and types of hospitals most impacted by changes in uncompensated care costs. Uncompensated care costs were highest in states that did not implement the Medicaid expansion. Considering hospital geographies, research suggests that post‑Medicaid expansion coverage uptake may be higher in rural as opposed to urban hospitals,14 but uncompensated care costs were highest among rural hospitals in non‑expansion states. A 2014–2019 study found that uncompensated care as a percentage of a hospital’s total operating expenses was highest among hospitals in rural, non‑expansion states.15 Among only rural hospitals, this study also found that primarily non‑expansion states held the highest 2014 median uncompensated care shares; in fact, these proportions were higher in 2019. Regarding hospital types, studies found that savings can occur for both for‑profit and non‑profit hospitals.16
Disproportionate‑share hospitals (DSHs), which treat an outsized number of low-income patients, have also experienced notable reductions in uncompensated care. A study that measured these reductions in terms of the number of days that a hospital bed is occupied (referred to as “quantity of care”) found that uncompensated days per bed decreased 35 percent in 2014, relative to the years 2011–2013; DSHs in expansion states also experienced 1.4 fewer uncompensated care days per bed than non‐DSH hospitals in 2014, relative to hospitals in non‑expansion states.17
Looking forward, the presumption is that any rollbacks to the policies that expanded health care coverage will reverse the gains in access and savings evidenced by the findings above. These gains were only enhanced during the COVID-19 period. Through the “American Rescue Plan Act,” Congress passed temporary provisions that (1) raised incentives for states that had not already expanded Medicaid access to low‑income adults to do so, and (2) expanded the ACA’s premium tax credits.18 As the state incentives expired in March 2023,19 and the premium tax credits expired at the end of 2025,20 researchers at the Urban Institute have projected that these reversions – and especially, the omission of any extension of the premium tax credits through the “One Big Beautiful Bill Act” – would yield drastic 2026 consequences for uncompensated care costs. The Urban Institute expects increased demand for uncompensated health care of 12 percent, or $7.7 billion, compared to demand with the premium tax credits still in place. Hospitals are projected to incur approximately $2.2 billion of these increased costs.21
Conclusion
Studies of ED visits and their effects on the financial viability of hospitals lead to two conclusions. First, people with insurance account for a larger share of ED visits. And second, providing insurance coverage to people who formerly did not have health insurance leads to substantial improvements in hospitals’ bottom lines, especially those in rural areas. It does this by increasing hospital revenue and reducing the high financial burden of uncompensated care that hospitals in states with large uninsured populations experience.
- This article was published at CEPR
- Acknowledgments: Thank you to Eileen Applebaum for providing valuable research insights and suggestions.
- See (as examples): Adam J. Singer et al., “US Emergency Department Visits and Hospital Discharges Among Uninsured Patients Before and After Implementation of the Affordable Care Act,” JAMA Network Open 2, no. 4 (2019),https://doi.org/10.1001/jamanetworkopen.2019.2662; Loredana Santo et al., “Trends in Emergency Department Visits Among People Younger Than Age 65 by Insurance Status: United States, 2010-2021,” National Health Statistics Reports, no. 197 (January 2024): 1–15, https://www.cdc.gov/nchs/data/nhsr/nhsr197.pdf.
- Santo et al., 2024 (see Endnote 1).
- Santo et al., 2024.
- See: Madeline Guth et al., The Effects of Medicaid Expansion under the ACA: Studies from January 2014 to January 2020, Kaiser Family Foundation (KFF) (2020), 1–100,https://www.kff.org/affordable-care-act/the-effects-of-medicaid-expansion-under-the-aca-updated-findings-from-a-literature-review/; Fan Zhao and Roch A. Nianogo, “Medicaid Expansion’s Impact on Emergency Department Use by State and Payer,” Value in Health: The Journal of the International Society for Pharmacoeconomics and Outcomes Research 25, no. 4 (2022): 630–37, https://doi.org/10.1016/j.jval.2021.09.014.
- Zhao and Nianogo, 2022 (see Endnote 4).
- Afsaneh Asgharian et al., “Association Between the Affordable Care Act and Emergency Department Visits for Psychiatric Disease,” Western Journal of Emergency Medicine 24, no. 3 (2023): 447–53, https://doi.org/10.5811/westjem.57630.
- Theodoros V. Giannouchos et al., “Association of Medicaid Expansion With Emergency Department Visits by Medical Urgency,” JAMA Network Open 5, no. 6 (2022): e2216913,https://doi.org/10.1001/jamanetworkopen.2022.16913.
- David Dranove et al., “Uncompensated Care Decreased At Hospitals In Medicaid Expansion States But Not At Hospitals In Nonexpansion States,” Health Affairs 35, no. 8 (2016): 1471–79, https://doi.org/10.1377/hlthaff.2015.1344.
- David Dranove et al., “The Impact of the ACA’s Medicaid Expansion on Hospitals’ Uncompensated Care Burden and the Potential Effects of Repeal,” Commonwealth Fund (2017), 1–9,https://www.commonwealthfund.org/sites/default/files/documents/___media_files_publications_issue_brief_2017_may_dranove_aca_medicaid_expansion_hospital_uncomp_care_ib.pdf.
- Jordan H. Rhodes et al., “Heterogeneous Effects of the ACA Medicaid Expansion on Hospital Financial Outcomes,” Contemporary Economic Policy 38, no. 1 (2020): 81–93,https://doi.org/10.1111/coep.12428.
- Fredric Blavin and Christal Ramos, “Medicaid Expansion: Effects On Hospital Finances And Implications For Hospitals Facing COVID-19 Challenges,” Health Affairs 40, no. 1 (2021): 82–90, https://doi.org/10.1377/hlthaff.2020.00502.
- Gary J. Young et al., “Impact of ACA Medicaid Expansion on Hospitals’ Financial Status,” Journal of Healthcare Management 64, no. 2 (2019): 91, https://doi.org/10.1097/JHM-D-17-00177.
- Meghana Ammula and Madeline Guth, What Does the Recent Literature Say About Medicaid Expansion?: Economic Impacts on Providers, Kellogg Family Foundation (2023), https://www.kff.org/affordable-care-act/what-does-the-recent-literature-say-about-medicaid-expansion-economic-impacts-on-providers/.
- Joseph A. Benitez and Eric E. Seiber, “US Health Care Reform and Rural America: Results From the ACA’s Medicaid Expansions,” The Journal of Rural Health 34, no. 2 (2018): 213–22, https://doi.org/10.1111/jrh.12284.
- Emmaline Keesee et al., “Uncompensated Care Is Highest for Rural Hospitals, Particularly in Non-Expansion States,” Medical Care Research and Review 81, no. 2 (2024): 164–70, https://doi.org/10.1177/10775587231211366.
- See: Thomas DeLeire et al., “Impact of Insurance Expansion on Hospital Uncompensated Care Costs in 2014,” U.S. Department of Health and Human Services – Office of the Assistant Secretary for Planning and Evaluation (2014),http://aspe.hhs.gov/health/reports/2014/uncompensatedcare/ib_uncompensatedcare.pdf; Danrove et al., 2016 (at Endnote 8); Rhodes et al., 2020 (at Endnote 10).
- Susan Camilleri, “The ACA Medicaid Expansion, Disproportionate Share Hospitals, and Uncompensated Care,” Health Services Research 53, no. 3 (2017): 1562–80,https://doi.org/10.1111/1475-6773.12702.
- Keith, Katie. “The American Rescue Plan Expands The ACA.” Health Affairs 40, no. 5 (2021): 696–97. https://doi.org/10.1377/hlthaff.2021.00597.
- Centers for Medicare & Medicaid Services (CMS), “ARCHIVED: Unwinding and Returning to Regular Operations after COVID-19.” n.d., https://www.medicaid.gov/resources-for-states/coronavirus-disease-2019-covid-19/archived-unwinding-and-returning-regular-operations-after-covid-19.
- Ali Swenson, “Health Subsidies Expire, Launching Millions of Americans into 2026 with Steep Insurance Hikes,” Politics, Associated Press (January 1, 2026),https://apnews.com/article/affordable-care-act-health-subsidies-expire-35060610e82ca3257821c53f2a34ecf6.
- Fredric Blavin and Michael Simpson, “Changes in Health Care Spending and Uncompensated Care under Enhanced Tax Credit Expiration for Marketplace Coverage: Updated 2026 State and National Estimates,” Urban Institute (2025),https://www.urban.org/research/publication/changes-health-care-spending-and-uncompensated-care-under-enhanced-tax-credit.
