The Financial Impact of the American Health Care Act’s Medicaid Provisions on Safety-Net Hospitals

Source: Allen Dobson, Joan DaVanzo, Randy Haught, Commonwealth Fund, June 2017

From the abstract:
Issue: Safety-net hospitals play a vital role in our health care system, delivering significant care to Medicaid, uninsured, and other vulnerable patients. The American Health Care Act (AHCA) would make changes to Medicaid that would substantially reduce federal funding, resulting in potential adverse effects on safety-net hospitals and the populations they serve.

Goal: Examine how the AHCA Medicaid provisions, which the Congressional Budget Office estimates will reduce federal Medicaid spending by $834 billion over 10 years, will affect the financial status of safety-net hospitals.

Methods: The Dobson | DaVanzo Hospital Finance Simulation Model uses Medicare Hospital Cost Report data for 2015 and assumptions regarding how states will respond to the AHCA Medicaid provisions to estimate the financial impact on safety-net hospitals.

Key Findings: Beginning in 2020 the financial status of safety-net hospitals will deteriorate as Medicaid coverage is reduced and the per-capita spending limits proposed in the AHCA grow. By 2026 total margins will drop to 0.5 percent compared with estimates under current law of 2.9 percent—representing an 83 percent reduction in net income for safety-net hospitals. Small rural safety-net hospitals and safety-net hospitals treating the largest proportion of low-income patients would be hurt the most.
Technical Appendix
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