The Impact of the Affordable Care Act: Evidence from California's Hospital Sector

Abstract

The Affordable Care Act (ACA) authorized the largest expansion of public health insurance in the U.S. since the mid-1960s. We exploit ACA-induced changes in the discontinuity in coverage at age 65 using a regression discontinuity based design to examine effects of the expansion on health insurance coverage, hospital use, and patient health. We then link these changes to effects on hospital finances. We show that a substantial share of the federally-funded Medicaid expansion substituted for existing locally-funded safety net programs. Despite this offset, the expansion produced a substantial increase in hospital revenue and profitability, with larger gains for government hospitals. On the benefits side, we do not detect significant improvements in patient health, although the expansion led to substantially greater hospital and emergency room use, and a reallocation of care from public to private and better-quality hospitals.

Community sociodemographics and rural hospital survival

“…Policies like Medicaid expansion, which promote improved health insurance coverage for previously uninsured people, help reduce uncompensated care expenditures and strengthen hospitals’ financial positions 54,55 . Previous studies have also found that Medicaid expansion is associated with improved hospital financial performance and lower likelihoods of closure 41,47 . Our analysis reinforces those results while demonstrating the compounding nature of the time component.…”

“…Our survival analysis results suggest that the risk of rural hospital closure increases as the levels of community unemployment and uninsurance rise. Recent studies have also found that increases in community unemployment 25,26,34 and uninsurance 41,47 are associated with hospitals’ financial distress and closure, but have stopped short of documenting the time‐relevant associations of these variables. These considerations are important when assessing policies that can help at‐risk hospitals and communities.…”

Does the ACA Medicaid Expansion Affect Hospitals’ Financial Performance?

“…Whether hospitals are in rural or urban areas also constitutes a source of heterogeneity. A few single-state studies find that rural areas substantially benefit from Medicaid expansion in early expansion states such as Oregon (Allen et al 2018) and California (Duggan et al 2018). Rural hospitals in Medicaid expansion states might expect greater improvement in their financial outcomes for several reasons.…”

Fiscal Federalism and the Budget Impacts of the Affordable Care Act's Medicaid Expansion

“…First, a substantial share (over 20%) of individuals who are eligible for the ACA expansion and the enhanced federal support were previously enrolled in Medicaid at lower federal reimbursement rates (Dorn, Francis, Snyder, & Rudowitz, 2015;Hall, 2018). Second, Medicaid funds may supplant some direct provision of health care services through public clinics, mental health facilities, and public hospitals that require state funding (Duggan, Gupta, & Jackson, 2019). Third, states may be able to reduce direct state spending on health care for individuals involved in the criminal justice system (Levy et al, 2020).…”