The effect of changing state health policy on hospital uncompensated care

This paper examines the effect of changing state policy, such as Medicaid e ligibility, payment generosity, and HMO enrollment on provision of hospital uncompensated care. Using national data from the American Hospital Associa tion for the period 1990 through 1995, we find that not-for-profit and publ ic hospitals' uncompensated care levels respond positively to Medicaid paym ent generosity, although the magnitude of the effect is small. Not-for-prof it hospitals respond negatively to Medicaid HMO penetration. Public and for -profit hospitals respond negatively to increases in Medicaid eligibility. Results suggest that public insurance payment generosity is an effective bu t inefficient policy instrument for influencing uncompensated care among no t-for-profit hospitals. Further, in localities with high HMO penetration or high penetration offer-profit hospitals, it may be necessary to establish explicit payments for care of the uninsured.