Need a perfect paper? Place your first order and save 5% with this code:   SAVE5NOW

Case Study: Impact of Affordable Care Act on Reduction of Health Uncompensated Costs

Executive Summary

The Affordable Care Act (ACA) of 2010 was aimed to increase affordability and accessibility of healthcare through the provision of tax credits to lower healthcare costs for low-income households. It also led to Medicaid program expansion for those who were not eligible for Medicare, reducing the rates of uncompensated care costs. Besides, the ACA influenced the operational cost of healthcare organizations since the cost of uncompensated care was a significant burden in healthcare. However, all states did not follow the ACA provision on Medicaid programs provisions. The case study canalized in this paper sought to evaluate the impact of expanded Medicaid programs on the uncompensated care cost in states that implemented the act. It also identifies key issues, situational analysis, strategy formulation, recommendation, implementation strategies, benchmarks for success, and contingency plans from the case study. Finally, it will discuss some of the benefits from the Affordable Care Act and the government and hospitals’ benefits due to Medicaid expansion. The study used in this analysis utilized credible data sources from hospital reports on Medicare cost to examine trends and changes in uncompensated care burden.

Key Issues

One of the key issues identified in the case study is the uncompensated care burdens that the hospitals face due to the lack of the ACA (Dranove et al., 2017). Uncompensated care entails health care services that organizations offer but are not either compensated or paid for. Before implementing the ACA, childless people, low-income and non-disabled adults were not eligible for Medicaid in most states. Moreover, hospitals faced many disadvantages such as bad debt and effects on profit margin due to the uncompensated care burdens. Clemens and Ippolito (2019) pointed out that hospitals tend to transfer the costs associated with bad debts and free care to other stakeholders, such as commercial insurance cover. Consequently, this transfer only leads to a higher premium. However, the expansion of Medicaid led to a reduction in uncompensated care costs, enabling hospitals to achieve financial sustainability.

Another key issue is the development of policies. Dranove et al. (2017) pointed out the importance of the policies and how they would guide decisions. The policies are important in implementing a system that would provide financial relief, especially among low-income and uninsured patients (Status of State Action, 2021).

Situational Analysis

The situational analysis is based on the relationship between Medicaid expansion, the uninsured, and uncompensated care. From the Medicare hospital cost reports on financial data, there was a reduction in uncompensated care costs with the selected states between 2013 and 2015 (Dranove et al., 2017). On the other hand, there was no change in the level of uncompensated costs in states that failed to expand Medicaid. The failure to expand Medicaid reduces hospitals’ efficiency and effectiveness (Dravone et al., 2017). The development of Medicaid helps the hospitals in the expansion states to improve operating costs. Dravone et al. (2017) noted that the reduction in uncompensated care costs in hospitals that implemented Medicaid programs resulted in increased profit margins.

According to Dranove et al. (2017), the rates of uncompensated care costs declined by at least 0.53% in the expansion states between 2013 and 2015 compared to a 0.12% decrease in hospitals within non-expansion states. Besides, the provision of Medicaid to nonelderly adults led to reducing uncompensated care costs by $6.2 billion (Dranove et al., 2017). Therefore, the Medicaid expansion and subsequent decrease in uncompensated care cost resulted in a financial significance.

Strategy Formulation

Strategy formulation is vital in ensuring that the Medicaid expansion reduces uncompensated care costs. One of the steps in strategy formulation was setting the expansion objectives. An objective such as the rates of reduction in healthcare costs helps ensure that Medicaid is affecting the healthcare costs positively (Ginter et al., 2018). The next step was the assessment of the organizational environment of Medicaid. It is important to determine how the Medicaid expansion would affect other insurers. The impact on other insurers in the market should be mitigated before the Medicaid expansion efforts. Under the assessment of the environment, it is also essential to check at both the advantages and the disadvantages of Medicaid and what outweighs the other to determine whether the implementation is effective.

Performance analysis such as the trend analysis is another required step in Medicaid expansion. After the Medicaid analysis, it is essential to assess the reduction rates of uncompensated care costs. From the trend analysis in the case study, the uncompensated care burdens from 2013 to 2015 fell from 3.9% to 2.3% (Dranove et al., 2017). The final step in the strategy formulation is determining the course of action during the implementation of the Medicaid expansion. Some of the approaches involve the development of policies, education, and training of the enrolees on Medicaid, and the establishment of market reforms to ensure Medicaid expansion.


Before expanding Medicaid, it is important to investigate the pre-existing insurance markets. The investigation of the pre-existing insurance is vital in ensuring that the implementation of Medicaid does not bring a loss to the other insurers. Medicaid expansion should ensure the existence of strategies that ensure expansion incorporates the other insurers to benefit financially.

Another recommendation is that the implementation of Medicaid programs should ensure that all the states have enough knowledge about these programs. The case study revealed that The beneficiaries should have easy access to information on Medicaid. Also, the hospitals should know about Medicaid and how they will benefit from the expansion. To develop Medicaid, there must be programs that have been developed and distributed that inform the enrollees on the health insurance. This information should be accessible to everyone, even the special groups such as people with disabilities.

Implementation Strategies

Several implementation strategies can be undertaken for the Medicare expansion to go on smoothly. One of the strategies is the implementation of market reforms. The reforms include expanding the number of people who are in a position to improve the market reforms. One of the ways that this expansion can be ensured is the banning of too many exclusions of the reforms (Dranove et al., 2017). This strategy should also ensure that a minimum set of essential health benefits are ensured. The state regulators should ensure that the market reforms are implemented and that the new protections are well regulated. Another strategy in implementing the Medicaid expansion is understanding the market dynamics. This understanding is essential in appreciating the existing insurance laws and determining how the Medicaid expansion will affect the stability of the insurance markets.

The development of policies is also another important thing in strategy implementation. The policies are essential in ensuring that the different states provide healthcare coverage to low-income families and individuals. These policies should ensure that the states design and administer their programs. The development of policies surrounding the implementation of Medicaid is vital because it provides that more states are concerned with the performance of Medicaid in the hospitals.

Benchmarks for Success and Contingency Plans

One of the benchmarks for the success of Medicaid is the reduction of uncompensated care costs. The Medicaid expansion should ensure that more people, especially those with low income, are covered. According to Dranove et al. (2017), the Medicaid expansion significantly reduces uncompensated costs. Another benchmark for success is ensuring the operational efficiency of the healthcare organization. With Medicaid, there will be more resources to guarantee more efficiency and improvement of the health outcomes of the patients. Besides, more people who can not afford healthcare will attend the hospitals, improving early assessment and reducing the disease burden among the patients. Various services in healthcare will be better utilized than before, which has a positive correlation to improved health outcomes. The low-income population will also have an improvement in financial security.

The ACA will be enhanced through the use of Medicaid expansion. The different states are expected to adopt the Medicaid expansion programs to ensure that the citizens have increased access to health care. An organizing committee is vital in ensuring that the different states comply with the expansion requests. As Dranove et al. (2017) have shown, reducing uncompensated care costs and expanding Medicaid requires investments and efforts from both the federal and local governments and individual healthcare organizations. The government should reduce the number of people who are limited or do not have insurance coverage for a continued decrease of uncompensated care costs.


Clemens, J., & Ippolito, B. (2019). Uncompensated care and the collapse of hospital payment regulation: An illustration of the tinbergen rule. Public Finance Review47(6), 1002-1041.

Dranove, D., Gathwaite, C., & Ody, C. (2017, May 3). The Impact of the ACA’s Medicaid Expansion on Hospitals’ Uncompensated Care Burden and the Potential Effects of Repeal. The Commonwealth Fund.

Ginter, P. M., Duncan, W. J., & Swayne, L. E. (2018). The strategic management of health care organizations. John Wiley & Sons.

Status of State Action on the Medicaid Expansion Decision. (2021, November 19). KFF.,%22sort%22


Don't have time to write this essay on your own?
Use our essay writing service and save your time. We guarantee high quality, on-time delivery and 100% confidentiality. All our papers are written from scratch according to your instructions and are plagiarism free.
Place an order

Cite This Work

To export a reference to this article please select a referencing style below:

Copy to clipboard
Copy to clipboard
Copy to clipboard
Copy to clipboard
Copy to clipboard
Copy to clipboard
Copy to clipboard
Copy to clipboard
Need a plagiarism free essay written by an educator?
Order it today

Popular Essay Topics