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States with Medicaid expansion see hospital closures: Study

By Sarah May on
 February 12, 2023

Though perhaps initiated with the best of intentions, Medicaid expansion has had a detrimental impact on the viability of hospitals in states that have adopted the plan, according to new research from the Foundation for Government Accountability (FGA).

The FGA study revealed that nearly 50 hospitals have been forced to close their doors since 2014 in states that accepted Medicaid expansion, and the program's “empty promises” are to blame, as the Daily Caller notes.

“Silver bullet” promised

As FGA's Hayden Dublois explains, widespread Medicaid expansion was billed as a veritable “silver bullet” for hospitals experiencing financial strain as well as a solution for gaps in the health care safety net.

Expansion, proponents claimed, would also result in the creation of thousands of new jobs in the health care sector, a valuable proposition with which few could disagree.

The sad reality, according to FGA's research, however, is that a decade after implementation began, Medicaid expansion has prompted hospital closures, job cuts, and financial liabilities that were by no means part of the plan.

In the end, Dublois asserts, the false promises made in this realm “have misled policymakers into enacting massive expansions of welfare,” and “hospitals increasingly find themselves victims of their own advocacy.”

Roots of expansion

As the Daily Caller notes, it was the Affordable Care Act (ACA), passed during the administration of former President Barack Obama, that first brought Medicaid expansion into the national discussion, attempting to extend coverage to those 65 and under with income at or under 138% of the federal poverty level.

While the ACA was designed to facilitate expansion in every state, the Supreme Court determined that the issue was one for individual legislatures to decide, with Democrat-led jurisdictions tending to quickly adopt the idea and Republican states proceeding somewhat more cautiously.

At present, 38 states and Washington, D.C. have agreed to Medicaid expansion, with South Dakota expected to do so later this year.

North Carolina's lower chamber, as Fox News notes, is poised to vote on expansion next week, and debate in a number of other states is ongoing, and FGA's findings may play a role in shaping those discussions.

Staggering shortfalls

FGA's research points to an “explosion in Medicaid shortfalls” stemming from expansion as a primary driver of negative fallout in states that have adopted the scheme.

As Dublois notes, those who supported expansion often concentrated only on the high cost of uncompensated medical care without taking into consideration the dangerous consequences of moving large numbers of Americans from private insurance plans over to Medicaid, which yields substantially lower reimbursement rates for health care providers.

With Medicare paying just 60% of what providers would typically receive under a patient's private insurance plan, states end up losing money on each person moved out of existing coverage and onto Medicaid.

The FGA study found that between the years of 2013 and 2016, Medicaid shortfalls at expansion state facilities skyrocketed by roughly $5 billion – an amount that greatly surpassed growth in revenue, and consequently, as profit margins improved in states that did not sign on to Medicaid expansion, they dropped –on average – by 10% over the same period of time in states that agreed to the expansion plan.

Closures continue, alarm sounded

According to FGA, the tangible – and very negative – effects of Medicaid expansion can clearly be seen in the sheer number of hospital closures that have occurred between the years of 2014 and 2022.

Almost 50 such facilities – including some in rural areas already suffering from a lack of health care options – have been forced to shut down, even though advocates and policymakers long argued that no such thing would happen.

Underscoring the direct relationship between expansion and closure rates, FGA's research further noted that of all of the recorded hospital closures in non-expansion states during the relevant period, 95% of those outcomes were explained by those involved as caused by factors unrelated to Medicaid expansion.

The bottom line, according to Dublois, is that it is past time for legislature to “finally reject the inaccurate claims of expansion advocates and dismiss the falsehoods related to expansions and hospitals,” and acknowledge that the scheme “does not help hospitals – it harms them.”