Report: Medicaid expansion would “profoundly improve” physical, economic health of rural NC

[Editor’s note: A new “must read” report by Dr. Patrick McHugh and Suzy Khachaturyan of the N.C. Budget & Tax Center provides more powerful data in support of the proposition that Medicaid expansion under the terms of the Affordable Care Act could bring enormous benefits to North Carolina’s rural health care system and “profoundly improve the physical and economic health of rural communities.” The report also makes clear, however, that many of the benefits of Medicaid expansion would be lost if lawmakers were to make burdensome work and premium requirements a part of any such change. The following is from “Strong medicine: Why Medicaid expansion is the right treatment for rural hospitals, economies.”]

Medicaid expansion is not just a moral imperative — it could provide a much-needed tonic for the fiscal ailments that many rural hospitals face in North Carolina.

Legislative leaders’ refusal to expand Medicaid has deprived hundreds of thousands of North Carolinians of lifesaving medical care and has left rural hospitals dangling in the fiscal winds. As has happened in many states where Medicaid expansion has been blocked by a hardened ideological agenda, rural hospitals in North Carolina are struggling to cope with a number of pressures, including high uninsured rates and uncompensated care costs. Seventy of North Carolina’s 80 rural counties are already designated as “medical deserts” for their lack of primary care availability and, if the General Assembly doesn’t pass Medicaid expansion this year, even more rural communities stand to lose their primary provider of critical health services.

This report details how full Medicaid expansion would shore up rural hospitals’ finances and why saving rural hospitals is essential to the long-term economic vitality of many communities in North Carolina.

Medicaid expansion would stabilize hospitals and improve access to health care

Medicaid expansion represents the most immediate and cost-effective way to stabilize rural hospital finances and expand coverage for North Carolinians. The effectiveness of Medicaid expansion in stabilizing rural hospitals has been dramatically borne out over the past several years, as the overwhelming majority of rural hospitals forced to close their doors were in states that have not expanded eligibility.

Across the country, more than 80 percent of the rural hospital closures since 2010 have occurred in the handful of states that have not implemented Medicaid expansion. North Carolina has sadly been part of this story, with five hospitals closing over that same time. Some of these hospitals could still be open today if leaders in the legislature had not stood in the way. Against this backdrop, the next section reviews current projections of how Medicaid expansion would increase coverage and bolster hospital finances.

Expansion would bolster rural hospital finances

Analysis by the Fiscal Research Division at the North Carolina General Assembly indicates that expanding Medicaid would benefit nearly every hospital in the state. North Carolina hospitals would collectively see hundreds of millions of dollars in net new annual revenue, and hundreds of thousands of people would gain access to affordable health coverage.

Once fully phased in, the Fiscal Research Division of the General Assembly projects that Medicaid expansion could provide affordable coverage for up to 650,000 people and generate more than $1.8 billion annually in hospital reimbursements. Even while covering the state’s share of the costs, hospitals would see a nearly $400 million net improvement in their financial standing. Preliminary estimates produced at the individual hospital level are provided in the Appendix.

The benefits of Medicaid expansion to people’s health and well-being and, in turn, to the broader community would be thwarted by the erection of barriers to health care for those in the coverage gap. While estimates produced by Fiscal Research suggest that hospitals could experience greater gains to their bottom lines, long-term improvements to health and the conditions under which hospitals operate would be hampered.

In addition, a host of challenges bedevil the process of predicting how restricting access to health care would affect those in the coverage gap and the financial impact on North Carolina’s hospitals. Analysis by Fiscal Research of House Bill (HB) 655 — which includes two such barriers (monthly work-reporting requirements and premiums) — indicates the bill would have a larger net fiscal benefit for North Carolina’s hospitals by $52 million, 13 percent higher than the net fiscal impact of full expansion by our analysis. However, a range of uncertainty around key factors could dramatically change that modest difference. The next section outlines a variety of risks inherent in requiring work reporting and premium payments that could decrease the fiscal boost that Medicaid expansion would provide for rural hospitals in our state.

House Bill 655, NC Healthcare for Working Families

HB 655, a bill to close the coverage gap, was introduced in the 2019 Legislative Session. While the bill would expand Medicaid eligibility to several hundred thousand individuals across the state as part of the Affordable Care Act (ACA), it includes harmful provisions that would make it extremely difficult for many low-income and working North Carolinians to qualify for the high quality, affordable health coverage they need. Specifically, it would take coverage away from individuals living near or below poverty if they:

• Do not report at least 80 hours of work or volunteer activities in a month
• Do not pay a monthly premium of 2 percent of their income

Why work reporting and premiums could decrease health coverage and undermine hospital finances

While it is impossible to precisely predict how many North Carolinians would likely lose coverage and how the practicalities of implementation would affect hospitals’ finances, the specific provisions of HB 655 would prevent North Carolinians from getting coverage and could in turn reduce the financial benefit for the state’s hospitals. To date, the policy debate and evaluation process has not generated a consensus view of how the provisions of HB 655 could undermine the goal of Medicaid expansion or the likelihood of different risks manifesting themselves during an implementation process. National researchers and observers of variations on these provisions and other barriers have found their implementation to dramatically reduce enrollment, undermining the purpose of Medicaid and the benefits to rural hospitals.

Premium requirements could result in larger coverage losses and greater harm to hospitals

A similar risk is present with premium payment requirements. HB 655 would require many potential Medicaid enrollees to pay 2 percent of their annual income to participate in the program. For a single parent with two children earning 138 percent of the Federal Poverty Level ($29,440), this would equate to paying nearly $600 over the course of a year, or roughly that family’s food budget for an entire month.

Click here to explore the rest of “Strong medicine: Why Medicaid expansion is the right treatment for rural hospitals, economies.”