Medicaid Expansion Won’t Stop Rural Hospital Closures

But it has disastrous consequences for state budgets and fosters high levels of dependency

By Hayden Dublois. He is data and analytics director at the Foundation for Government Accountability. Excerpts:

"I have analyzed every hospital closure since 2014 when ObamaCare went into effect. Medicaid expansion has failed to halt rural hospital closures, and in some cases it contributes to them. The reason is simple: Medicaid is so poorly run that it often adds financial burdens to hospitals. The 10 Republican-led states that haven’t adopted this policy would be wise to hold their ground, given that Medicaid expansion also has disastrous consequences for state budgets and fosters historic levels of government dependency.

Here are the facts. Since 2014, dozens of hospitals have closed in states that haven’t expanded Medicaid. Yet their stated reasons almost always have nothing to do with Medicaid expansion. Damage from natural disasters, declining business and fraud, among many other factors, have caused hospitals to close. Only four hospitals in nonexpansion states directly attributed their closures to a lack of Medicaid expansion. Two of them later were alleged to have engaged in wide-scale fraud and financial mismanagement, casting doubt on their earlier statements.

Even more telling is what happened in the nearly 40 states that did expand Medicaid before the start of this year. Despite the assurances of liberal activists, nearly 50 hospitals have closed in these states since expansion passed, including more than a dozen in rural areas. Missouri voted to expand Medicaid by ballot initiative in August 2020, with implementation beginning a little more than a year later. Yet two rural hospitals closed in September 2022, well after expansion took effect.

The situation will surely worsen. According to data from the Center for Healthcare Quality and Payment Reform, 1 in 4 rural hospitals in expansion states are still at risk of closure. A 2019 Navigant study found that the top five states at risk of losing community-essential rural hospitals are all expansion states.

This is exactly what Medicaid expansion was supposed to prevent, yet expansion itself is driving this crisis in rural and urban hospitals alike. The program’s reimbursement rates are about 60% of what private health insurance pays, often leaving hospitals with large losses on Medicaid patients. Nationwide, more than 18 million able-bodied adults and counting have enrolled in the program due to expansion, and each new recipient potentially adds red ink to a hospital’s balance sheet.

Rural hospitals typically struggle financially as it is, and Medicaid expansion can push them into insolvency. But the problem isn’t limited to rural hospitals. Pennsylvania expanded Medicaid in 2015 and Philadelphia’s Hahnemann Hospital closed in 2019 because of what the Philadelphia Inquirer called a “heavy reliance on Medicaid.”"