Medicaid Expansion and Hospital Finances Before and During the COVID-19 Pandemic: A Three-Period Difference-in-Differences Analysis, 2011–2023

(Background) Medicaid expansion was associated with better hospital finances before 2020, but the COVID-19 pandemic introduced broad federal support and temporary continuous Medicaid enrollment in all states. (Objective) To examine whether the association between Medicaid expansion and hospital finances differed before, during, and after the main pandemic-relief period. (Methods) Medicare cost reports for US short-term acute care and critical access hospitals (2011–2023; reports of 150–366 days) provided 44,026 hospital-years from 3,708 hospitals. Two-way fixed-effects difference-in-differences models with hospital and year fixed effects, and standard errors clustered by state, compared 2,204 hospitals in the 27 states that expanded Medicaid in January 2014 with 1,504 hospitals in the 13 states that had not expanded by 2023, across 2014–2019, 2020–2021, and the 2022–2023 transition period (reference 2011–2013). Robustness was assessed by omitting each state in turn, estimating each state separately, and repeating models within subgroups. (Results) In the pre-pandemic expansion period, the adjusted expansion-versus-non-expansion change in uncompensated care was −5.12 percentage points of costs (95% CI, −6.67 to −3.58), the margin estimate was +1.25 points (95% CI, −0.25 to 2.75), and days cash on hand was +8.1 days (95% CI, 3.4 to 12.7). During 2020–2021, the uncompensated-care difference was −3.43 points, and during 2022–2023 it was −2.67 points; both were smaller in magnitude than the 2014–2019 estimate (p = 0.003 and p = 0.002 for the period contrasts). The margin contrast was −2.09 points during 2020–2021 (p = 0.039), whereas the cash-on-hand contrast was not different from the pre-pandemic estimate (p = 0.985). The broad other-income measure did not differ between groups in any period and cannot isolate Provider Relief Fund payments. Estimated convergence was concentrated in prospective-payment, urban, and Southern hospitals; critical access hospitals showed no statistically detectable change. (Conclusions) The expansion-associated difference in uncompensated care narrowed during 2020–2021 and remained smaller in 2022–2023, while margin and liquidity differences were not statistically detectable. These patterns are consistent with partial substitution by pandemic-era policies, but the design cannot identify which policy produced the convergence.