Montana Hospitals Benefiting From Medicaid Expansion

Oct 19, 2016

In 2015, the Montana Hospital Association enthusiastically backed Medicaid expansion in Montana. A big reason was that in the first half of the year, they gave away nearly $71 million in free, or “charity” healthcare to people who had no health coverage.

After the legislature narrowly passed Medicaid expansion, Hospital Association President Dick Brown says, "the actual expectation was that charity care would go down, because a lot of the individuals who are now on Medicaid were receiving care at no cost to them, because they couldn’t afford it."

The numbers are now in for how Medicaid expansion impacted Montana’s hospitals in the first half of 2016. The charity care number dropped by 45 percent year on year, from $71 million to $39 million.

"I think the fact that we have 50,000 people covered, that’s a huge statement for the state of Montana," says Brown.

It’s logical to think that a big increase in people with health coverage, and a big drop in the amount of charity care that hospitals have to give away would also mean big improvements in hospitals’ overall bottom lines, their profit margins. But Brown says that’s not the case this year compared to last.

"So initially we’re seeing that whatever margin there was is much smaller than even a year ago, if you compare ourselves to a year ago," says Brown.

Brown says there are a number of reasons for that. One is that all the people coming to hospitals with new coverage means increased expenses. Hospitals have had to staff up and buy new equipment to meet the new demand. Medicaid covers 101 percent of the expenses of caring for new Medicaid patients at most of Montana’s hospitals, but bigger hospitals say Medicaid doesn’t cover their expenses.

"I think there may have been some expectation that financially, the outcome might have been better. Again, I think over time you're going to see -- and we're going to need a year or two to really prove this out… we may see a general financial improvement, probably not huge," says Brown.

And it’s not just Medicaid that’s responsible for Montana hospitals seeing their profit margins shrink from more than 8 percent in the first half of last year to just over 4 percent this year. There have been significant changes in private health insurance, too. Among them, insurance companies are driving harder bargains with hospitals.

Insurance companies can negotiate discounts on hospital prices because they often have the power to decide whether or not to include a given hospital in their networks. Hospitals are willing to lower their prices in return for an insurance company including them in their network.

"A patient out-of-network would pay quite a bit more because the insurer has a different rate when they're out-of-network for the similar service. So there are a lot of nuances to the healthcare industry and the insurance payment side of it," says Brown.

The Hospital Association says insurance companies negotiated price discounts that are 12 percent larger in 2016 than last year. Private insurance companies, and big employers who offer their workers coverage, are also requiring larger deductibles, meaning that patients are increasingly responsible for paying larger and larger portions of their hospital bills.

"If you were at a $500 deductible plan, and today you’re at a $5,000, there are just a lot of people who do not have the $5,000 and they then cannot afford to pay that deductible," says Brown.

That means, Brown says, that hospitals have seen their unpaid bill numbers outside of charity care increase by 6 percent the first half of this year compared to the first half of last year. 

The Hospital Association report contains some significant caveats, Brown says. First, it includes data from more than 80 percent of the state’s hospital capacity, but not from every hospital in the state.

And the first six months of this year are also the first six months of Medicaid expansion in Montana. The numbers of people enrolled in Medicaid in June are substantially higher than they were in January. It’s also estimated that an additional 20,000 Montanans may enroll in Medicaid in the near future.

The report also notes that Montana hospitals added the equivalent of 354 new full time jobs in the first half of 2016, but it’s unclear exactly how many of those can be attributed to Medicaid expansion.

I had one more question for Hospital Association President Dick Brown.

Eric Whitney: I think people who like the Affordable Care Act, and people who don't, could both potentially point to this report and say, 'see, this proves that it's working,' or, 'this proves that it's not workin.'

Dick Brown: We've looked at it really closely as well, and you could make the case either side, but I think the important takeaways are that this is a six month report, so you can't just double everything and say this is what's going to happen in a year. Things change at the end of this calendar year. They will change at the end of 2017. And I think at that time, it's a better time to maybe judge whether this is working as well as maybe it appears it's working. I think it is important for people to weigh carefully their opinions about what the program is doing -- good or bad -- until we get some more time behind us. And the thing we really don't have enough time to look at is, what is the health benefit of those 50,000 people. And that's going to take 5-10 years to really see how much we've improved the health. People who right now would be looking at some heart issues, or cancer issues, or things they might not catch appropriately, or in a timely manner; those will be really hard to measure but I think that's the long term outcome that hopefully we can point back to and say we did the right thing, people are covered and their care is being provided. 

EW: It's not all about bottom-line financials I guess?

DB: It really isn't. I think there's a higher mission for all of us.

You can see the Montana Hospital Association's press release here.