Azemina Redzematovic is a student at Hunter College.
Topic: “The Effects of the ACA’s Medicaid Expansions and Woodwork Effects on Hospital Finances” (with Jessica Van Parys)
Abstract: The expansion of Medicaid eligibility to childless adults below 138% of the Federal Poverty Level was a major component of the 2010 Patient Protection and Affordable Care Act (ACA). Medicaid enrollment increased significantly in states that expanded eligibility, and Medicaid enrollment even increased in some states that did not expand eligibility, where this increased rate of take-up is referred to as the “woodwork effect.” Since state Medicaid programs set lower hospital reimbursement rates than private health insurers, this paper asks how the increase in Medicaid enrollment has affected hospital finances since 2010. We use hospital financial data from all acute care hospitals in California, Florida, and Texas to estimate a dynamic difference-in-differences (DD) instrumental variables model. The first stage uses a DD estimator where the “treated group” includes hospitals with higher shares of visits by Medicaid patients in the pre-ACA period (i.e., safety-net hospitals), and the “control group” includes hospitals with lower Medicaid shares of total visits. We find that safety net hospitals received relatively more Medicaid patient demand post-ACA, but that the increases in Medicaid demand were offset by decreases in demand from self-pay and private-pay patients. As a result, safety net hospitals did not earn higher operating profits compared to non-safety net hospitals in the post-ACA period. Our results suggest that private insurance crowd-out was nontrivial, and that hospitals may not have significantly benefited from the Medicaid-related provisions in the law.