Looking at Effects of Tennessee Medicaid Contraction on Adult Hospitalizations

The 2010 Affordable Care Act (ACA) Medicaid expansions increased coverage by incorporating previously neglected groups into the eligibility criteria of Medicaid insurance—in particular, low-income, non-elderly adults. Individuals falling into this category were previously treated as “optional” Medicaid beneficiaries. It was up to each state to decide whether or not to expand its coverage by including this group as beneficiaries.

So far, previous research has focused on finding evidence of the effects of ACA Medicaid expansions in reducing mortality among the newly insured population. However, there is still a lack of understanding of the mechanisms under which insurance expansion translates into mortality reduction.

Working with the National Bureau of Economic Research, Ausmita Ghosh and Kosali Simon analyze the effects of the 2005 Medicaid contraction in Tennessee. Over 170,000 Medicaid beneficiaries lost coverage during this contraction. Ghosh and Simon examine the impact of this policy change on inpatient hospital care utilization among non-elderly adults. The study provides conclusive evidence of three main effects following the contraction: i) a stark increase in the prevalence of uninsured patients among hospital admissions (above 60 percent) after the Medicaid contraction; ii) a rise in admissions through the emergency room, outpacing the rise in admissions through non-emergency sources, among uninsured, inpatient admissions; and iii) a decrease in the overall volume of hospitalizations.

These findings constitute a great contribution to the literature because this study is the first to provide evidence of these aspects from a quasi-experimental methodology. The empirical analysis uses the Nationwide Inpatient Sample (NIS) 2001-2009, which is part of the Healthcare Cost and Utilization Project (HCUP) of the Agency for Healthcare Research and Quality. Researchers compared data from four years prior to the contraction to data from four years after it. Additionally, they were able to run data comparisons within and across states (southern states that did not contract or expand Medicaid, before and after Tennessee’s policy change), testing the robustness of their findings.

The implications of their findings are also important because they shed light on the understanding of two previously understudied aspects. In the first place, they suggest a potential negative spillover effect that Medicaid disenrollment may have on hospitals through an increase in uninsured visits. Restricting Medicaid eligibility in Tennessee led to a 21 percent decrease in Medicaid coverage and a 61 percent increase in uninsurance among non-elderly, adult hospitalizations. Such a change has implications for hospital revenue streams, since most uninsured visits result in unpaid bills. This represents a potentially significant negative impact on hospital finances.

Secondly, while prior studies find that pre-ACA, state Medicaid expansions reduced mortality among non-elderly adults, the mechanism driving this result was unclear. The results from this study suggest that an increased use of hospital-based care, due to Medicaid coverage expansions, may have been a plausible pathway leading to mortality reductions among the non-elderly population.

Following on the evidence provided and its implications for this study, it is now clearer how the ACA has improved access to healthcare among previously ignored groups and how their health may have benefitted from healthcare utilization. It is also important that these findings help bring to light the previously ignored effects of contractions of insurance coverage on non-elderly adults, specifically uncompensated costs for hospitals, and how Medicaid expansions may help reduce the burden of unpaid bills.

 

Article Source: “The Effect of Medicaid on Adult Hospitalizations: Evidence from Tennessee’s Medicaid Contraction,” Ausmita Ghosh & Kosali Simon. NBER Working Paper No. 21580. http://www.nber.org/papers/w21580

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