No, Medicaid Expansion would not save all hospitals

Medicaid Expansion continues to be a big political debate in Kansas. As of this writing, Kansas is one of just ten states to not implement the government expansion. Last week, we looked at the history of U.S. Healthcare, and this week, we’re taking a closer look at Medicaid Expansion by examining one of the most common talking points that Democrat Gov. Laura Kelly has used. Her big claim that expanding Medicaid would save rural hospitals.

“The closure of yet another rural healthcare provider shows why we must expand Medicaid immediately,” Gov. Kelly said in a written statement. “Now, Kansans who relied on the CareArc Health Clinic will have to drive farther or wait longer for basic care. Expanding Medicaid could have helped the clinic recruit and retain the workers it needed to continue serving patients.”

It’s important to know that CareArc Health Clinic would have still closed, even if Medicaid Expansion occurred, and this is even stated by CareArc CEO Renee Hively who said that ‘Medicaid expansion would have helped the Eureka clinic get closer to a break-even level, but the main reasons for the closure were decreases in population density and productivity as well as increasing issues recruiting providers to a “frontier county.”’

This is a basic economics issue where the demand for the service was simply not there and therefore the service shut down.

Speaker of the House Dan Hawkins (R-Sedgwick County) took to social media to point this out, stating, “Medicaid expansion would have thrown more of your money at the problem but still wouldn’t bring in enough to keep the clinic open because the real reasons for closure were a decreasing population, decreasing productivity, and difficulty finding providers who are willing to live in rural Kansas.”

It should be noted that this is a common thing for hospitals that close to end up claiming. In fact, decline in utilization is the most common reason hospitals that close in non-expansion states claim for their closing. A lack of Medicaid Expansion is rarely ever the cause and often times when it is considered to be a cause, it’s compacted with other more major issues.

Nevertheless, Gov. Kelly has gone on to make further claims such as the following:

8 hospitals have now closed since we've had the option to expand Medicaid and support our hospitals, and over half of our rural hospitals remain at risk of closing. Kansas legislators must listen to the 78% of Kansans who want to save their local hospitals and expand Medicaid.

— Governor Laura Kelly (@GovLauraKelly) October 13, 2023

Gov. Kelly constantly makes it seem like if we just grow the government bigger, all at-risk hospitals will just automatically be saved from closing down. As it turns out, however, that’s not true. We can look to other states that have expanded Medicaid to see this. From 2014 to 2022, nearly 50 hospitals—including more than a dozen rural hospitals—in expansion states have closed, despite what expansion advocates were saying.

In some cases Medicaid Expansion has even led to hospitals closing. Hahnemann University Hospital in Pennsylvania (an expansion state) relied heavily on Medicaid. However, due to the low Medicaid payments, the hospital could not break even and had to close. It was noted that at one point the hospital received a profitable mix of government and private payers, but was eventually dominated by Medicaid. This led to “the most significant graduate medical education displacement in history, sending over 550 residents to new institutions within a month of the announcement.” The 2019 closing also led to over 2,000 physicians, nurses, and staff losing their jobs.

It is also important to note that hospitals are still opening up in rural Kansas such as the 50-bed full-service hospital coming to Pittsburg, KS—the most populous city in Crawford County with a population of 20,646 according to the 2020 census. If rural hospitals were so desperate for Medicaid Expansion in order to stay open, it wouldn’t make financial sense for a hospital to open in rural Kansas where there hasn’t been Medicaid Expansion in years.

We need to understand that closures happen. That’s part of a free-market economy. When we start getting government involved to keep businesses open, prices begin to get inflated as government starts picking winners and losers, leading to less competition, less innovation, and lackluster services. Medicaid Expansion may sound nice, especially when advocates start using their talking points, but when you actually look at reality, you start understanding that that’s all they are—talking points.