Inmar Inc. | June 11, 2013

Last summer, the U.S. Supreme Court upheld the constitutionality of the Affordable Care Act (ACA). However, the court struck down the rules forcing states to expand Medicaid eligibility. With states able to decide if they want to participate in Medicaid expansion without having their current funding cut, governors and state legislatures hold the fate of this portion of ACA in their hands. And, the numbers are interesting — as of May 13, 2013, there were 15 states not participating, five leaning towards not participating and three pursuing an alternative model. Many of the states cited economic issues as a reason for not participating.

While health systems around the country are in support of the Medicaid expansion to reduce uncompensated care costs and are conducting marketing campaigns to push states' involvement, the Utah Hospital Association (UHA) issued a policy statement in late 2012 to discourage their state from participating in the ACA provision. Citing the need for a free-market solution and avoiding adverse impact on the commercial insurance market, UHA has entered the political fray in much different position from many of its peers, including the American Hospital Association.

But, will participating in the ACA Medicaid expansion provision help hospitals and health systems? That is a tricky business and is a numbers game. The ACA could cost hospitals up to $300 billion for the next 10 years by reducing fee-for-service Medicare reimbursement and cutting federal payments to compensate hospitals for providing free care to the poor (http://www.pewstates.org/projects/...). However, hospitals think this will be offset by the increased numbers of people who will be purchasing insurance through a health exchange.

In the potential 23 states not participating in the expansion, this increased revenue is not a guarantee. According to "An Evaluation of the Impact of Medicaid Expansion in New Hampshire" by The Lewin Group in November 2012, expanding Medicaid in that particular state would have cut the number of uninsured residents in half by 2020 and would add approximately 60,000 patients to Medicaid rolls. It remains to be seen if this model would hold true in other states, but it is an interesting perspective and one that bears close examination.

Health systems and hospitals in non-participating states are faced with the task of absorbing indigent care costs and must explore other revenue streams to offset declining operational margins. As belts tighten, pharmacies are a place where return credits and financial reconciliation can add to a bottom line struggling to meet patient needs.

The ACA has changed the face of U.S. healthcare and I would like to hear your thoughts on where you think the solutions will be found. Please leave your comments below.