Moody's warns of trouble for hospitals without Medicaid expansion

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But the Supreme Court's decision to uphold the Affordable Care Act made that expansion optional, and 14 governors have chosen not to pursue it, citing cost concerns. 

These states will face "budgetary strain" one way or the other, said Nicole Johnson, a senior vice president with Moody's, on Thursday.

"States that opt out of Medicaid expansion will have to choose whether to compensate for the shortfalls with their own funds or leave hospitals to absorb the costs, which will increase rating pressure on the hospitals," Johnson said in a statement.

Several GOP governors have chosen to back the Medicaid expansion under pressure from hospitals and in spite of their past criticism of the healthcare law.

In Arizona, for example, Gov. Jan Brewer (R) is working with Democrats and the healthcare community to push Republicans to accept the massive federal grant that would accompany fuller Medicaid rolls.

Moody's predicted that DSH payments would fall by $17 billion by 2019. The reduction starts in October.