Medicaid Expansion May Lead to Higher Hospital Prices | Eastern NC Now

    Publisher's Note: This post appears here courtesy of the John Locke Foundation. The author of this post is Brian Balfour.

    The News & Observer today highlights a recent article in the medical research journal Health Affairs which warns that North Carolina's Medicaid expansion could lead to higher hospital prices.

    Two health care policy experts explained their concerns about North Carolina's Medicaid expansion plan in the research journal Health Affairs last month.

    "This is almost like the elephant in the room," said Ge Bai, a Johns Hopkins researcher and one of the article's authors. "People want to paint Medicaid expansion as this perfectly successful program and don't want to highlight these hidden costs."

    What would be the source of these added costs imposed on patients?

    The state share of Medicaid expansion will be largely paid for by a new hospital tax. With already thin margins, North Carolina hospitals will seek to recoup the cost of the tax via higher reimbursement rates. Moreover, according to the journal article, federal rule changes eliminated a prior cap on Medicaid reimbursement rates, leaving "commercial" rates (i.e. private insurance) as the only limit. As a result, the combination of these factors "invites hospitals to hike commercial rates to effectively raise the ceiling on their Medicaid rates at the same time."

    This comes as no surprise to us here at Locke, however, as we've been warning about this for years. In 2019, I wrote about this topic:

    "... hospitals can seek to pass along the added tax burden to consumers... And because of increasing hospital consolidation, hospitals have bargaining power to drive up reimbursement rates they receive from insurance companies. In turn, insurance companies must raise premiums on customers to compensate for the higher reimbursements they pay to providers."

    This latest journal article serves as yet another warning about the harmful impacts of Medicaid expansion. Locke has also highlighted how expansion will stretch an already overcrowded program even thinner, making it difficult for enrollees to access care.