The current draft of the Build Back Better Act (BBBA) includes provisions to increase health care subsidies and health insurance coverage nationwide and to augment coverage in the 12 states that have not expanded Medicaid under the Affordable Care Act (ACA), hereafter called “nonexpansion states.” These provisions are expected to extend health insurance coverage to millions of people and to lower the cost of health care for many families. In this analysis, we compare (1) additional resources from two important provisions of the BBBA intended to help people with incomes below the federal poverty level (FPL) in nonexpansion states (also known as people in the “Medicaid gap”) with (2) the 12.5 percent reductions in federal Medicaid disproportionate share hospital (DSH) allotments in nonexpansion states also proposed in the BBBA. Provisions of the BBBA would extend enhanced Marketplace subsidies to people in the Medicaid gap. If those provisions were implemented, the increased federal subsidies that would flow to nonexpansion states would be significantly larger than the proposed Medicaid DSH cuts while the subsidies are in effect. The increased federal subsidies would stem mainly from the two BBBA provisions modeled here: one that extends American Rescue Plan Act subsidies and a second provision that extends Marketplace eligibility to people in the Medicaid gap. We refer to these two provisions collectively as the “reform.” Though only a portion of the total increased federal spending under the reform would flow to hospitals, our estimates conclude that in the years during which additional subsidies would be provided, hospitals overall would be substantially better off than they are under current law, even after a Medicaid DSH cut. Another recent analysis of the effect of filling the Medicaid gap also finds large net benefits to hospital finances in nonexpansion states.
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