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HEALTHLINE NEWS

Do We Really Save Money by Cutting Medicaid?

Medicaid cuts proposed by Congressional Republicans would reduce spending, but they could cost the country more in other ways.

Medicaid cuts

Wrapped up in Republican efforts to repeal and replace the Affordable Care Act (ACA) are significant cuts to the Medicaid program.

The bill passed by the House and the one proposed by the Senate would reduce Medicaid spending by as much as $800 billion by 2026, according to analysis by the nonpartisan Congressional Budget Office (CBO).

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Both bills would roll back the Medicaid expansion that was part of the ACA and put a cap on funding provided to states as part of the program.

“It’s not just a repeal of the ACA. It’s actually going a step further and reducing the total governmental input into the safety net program we know as Medicaid,” Michael Topchik, national leader for the Chartis Center for Rural Health, told Healthline.

The CBO estimates that the bills would reduce the number of Medicaid enrollees by up to 15 million people over the next decade.

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Right now this federal-state program provides health insurance to about 20 percent of lower-income people — a total of 74 million Americans.

This includes 64 percent of nursing home residents, 30 percent of adults with disabilities, and almost 40 percent of all children in the country.

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A big motivation for some Republicans is to reduce spending — which these bills clearly do.

But do we really save money by making it harder for lower-income Americans to access healthcare?

And what about the ripple effects that these cuts will have on hospitals — especially those that serve a high number of Medicaid enrollees — and state and local economies?

“Patients are going to feel it, providers are going to feel it, and state and local governments are going to feel it,” Fredric Blavin, PhD, a senior research associate at the Urban Institute, told Healthline. “And there’s going to be the potential for a lot of significant consequences down the line.”

Read more: How the GOP healthcare bill would affect one family in Kansas »

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Preventing chronic diseases saves money

According to the Centers for Disease Control and Prevention (CDC), each year the United States spends trillions of dollars treating chronic and mental health conditions.

Cardiovascular disease alone costs the country $316 billion.

About 60 percent of this is direct medical expenses. The rest is due to lost employee productivity.

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Other diseases are equally expensive — cancer costs $157 billion, diabetes $245 billion, arthritis $128 billion, and obesity $147 billion.

Even small reductions in these illnesses can result in major savings.

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But that requires some kind of up-front investment. This could mean health insurance, access to healthcare, or public education programs to reduce risk factors for these diseases.

Medicaid provides one avenue for tackling these diseases in people who can’t afford health insurance otherwise — and who may not have access to affordable healthcare without it.

Research summarized by the Kaiser Family Foundation shows that the 31 states — and the District of Columbia — that chose to expand Medicaid saw a drop in the number of uninsured people in the state and an increase in people accessing and using medical care.

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Some studies also found a rise in the number of people being diagnosed with chronic conditions and receiving regular care for those diseases.

But it’s difficult to know whether Medicaid has helped people become healthier, especially since it’s only been a few years since the expansion was implemented.

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Several studies cited by the Kaiser Family Foundation showed improvements in people’s self-reported health. They also showed cases of people receiving life-saving care that they couldn’t afford before.

A study published last month in the Journal of the American Heart Association also found that the rate of sudden cardiac arrests outside of a hospital decreased among 45- to 64-year-olds in one Oregon county after the Medicaid expansion.

This study was small, so other factors could be behind this. But it fits with research that shows a decline in mortality in some states that expanded Medicaid.

However, a larger study in Oregon found no increase in the diagnosis or treatment of high blood pressure or high cholesterol in Medicaid enrollees, compared to similar people who were not on Medicaid.

Diagnosis and treatment of diabetes also increased in Medicaid enrollees, but their blood sugar levels remained high.

Researchers, though, did see improvements in enrollees’ mental health.

The CDC estimates that mental illness costs the country $300 billion per year. This is another area for potential savings from Medicaid investments.

Read more: Health organizations lash out at House healthcare bill »

Medicaid keeps many hospitals healthy

Rolling back the Medicaid expansion is also likely to have a big impact on hospitals, especially those that care for a disproportionate number of Medicaid enrollees.

Without health insurance, people may sometimes skip seeing a doctor because they can’t afford it. But going without isn’t always an option.

“[Uninsured] folks are not going to be able to pursue care in a primary care environment, which would be more appropriate, say, for strep throat or taking care of their diabetes on a regular basis,” said Topchik. “And they’re going to show up in the emergency rooms of hospitals.”

Federal law requires hospitals to treat people even if they don’t have insurance. That means some patient bills never get paid. This is known as “uncompensated care.”

“Ultimately, those dollars are paid for by providers, taxpayers, local and state government, and the federal government as well,” said Blavin.

One of the most noticeable effects of the Medicaid expansion under the ACA was a drop in uncompensated care at hospitals in states that expanded the program.

A 2016 study by Blavin in the Journal of the American Medical Association found that on average, hospitals saved $2.8 million per year. This represents a 30 percent decrease from before the expansion.

The study included 1,200 to 1,400 hospitals in 19 states that expanded Medicaid. Added together, this comes out to about $3.4 billion to $3.9 billion less uncompensated care per year in just those states.

Experts worry that rolling back the Medicaid expansion — and making even deeper cuts to the program — would put more pressure on hospitals that care for the uninsured.

“[Uncompensated care] costs are significant,” said Blavin, “and need to be taken into account when you look at what the overall effect would be of reducing, or cutting back on, the Medicaid expansion.”

Read more: If you want to die young, move to rural America »

Rural areas hit hard

The impact might be even more painful in rural areas, where hospitals serve a large number of people who are poorer and sicker than the rest of the country.

“The government is the single biggest payer in rural hospitals,” said Topchik. “And that’s quite different from non-rural hospitals.”

Topchik estimates that “a little less than two-thirds of rural hospital payments come from Medicare and Medicaid.” This is the reverse of what is seen in non-rural hospitals.

A recent analysis by Chartis estimates that the Medicaid cuts proposed by the House and Senate would result in a loss of $1.3 billion to $1.4 billion in revenue each year to roughly 2,200 rural hospitals in the country.

This would be accompanied by the loss of 34,000 healthcare and community jobs in a year as hospitals make cuts to compensate for lost Medicaid funding.

As a result, the United States would see a $3.8 billion to $4.1 billion decline per year in its Gross Domestic Product (GDP) — just from the effects of the Medicaid cuts on rural hospitals.

Many rural hospitals are already on shaky financial ground — 41 percent of rural providers are operating in the red. Chartis estimates that the Medicaid cuts could push this to 48 percent.

Topchik is concerned about an increase in rural hospitals with a negative operating margin. But he said the real story is what will happen to hospitals that are already in the red.

Since 2010, more than 80 rural hospitals have closed.

Medicaid cuts could cut off even more hospitals from life support.

This is exactly what people who rely on Medicaid don’t need, especially those living in rural areas where there is already a shortage of primary care, dental care, and mental health services.

“This is a portion of the population that is desperately in need of not just the care they have right now,” said Topchik, “but even more care.”

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