Yang Wang, PhD Candidate in Health Economics and Policy

Title: The Impact of the ACA Medicaid Expansion on Hospital’s Private Sector Price and Cost Structure

Abstract: The ACA Medicaid expansion has improved hospital’s revenue structure through increased Medicaid revenue and reduced uncompensated care cost. However, less is known if this policy has an indirect effect on hospital’s private sector price and cost. The cost shifting hypothesis would predict a private sector price reduction. However, Medpac’s financial pressure theory would predict a cost increase instead of price changes.

This study empirically tests these two competing theories in the context of Medicaid expansion. Using 2011-2018 hospital data with a DID and event study model, I found that non-profit hospitals located in Medicaid expansion states were associated with no reduction in private sector price. While the increase in operating cost per discharge equivalent (DE) was insignificant, I found a 1.8% increase in patient care cost per DE (p<0.1), and a 4.9% decrease in administrative cost per DE (p<0.1). The results suggests that Medicaid expansion has led to minor changes in non-profit hospital’s resource allocation, but no evidence on reduced private sector payment rates.