Medicaid Expansion Is Going To Drown Hospitals In Red Ink, But Don’t Tell JBE

So, John Bel and the Gang would be very quick to tell you that expanding Medicaid is the right and moral thing to do. Not only does it put a lot more people on the government dime, it also saves hospitals… at least, that’s what they say. That’s also what the hospitals will say. Which is all fine and dandy, except that the claim now flies in the face of what the Congressional Budget Office says in a new report.

The report provides several reasons why Medicaid expansion will not cure hospitals’ financial woes. Whereas CBO assumed that exchange plans would reimburse hospitals above their average costs, “Medicaid’s payment rates are below hospitals’ average costs.” Medicaid revenues will likely grow more slowly over time, as Medicaid payment rates cannot exceed Medicare levels — and Obamacare dramatically slowed those Medicare reimbursement levels. Moreover, CBO estimated “that the use of hospitals’ services among the newly insured will increase by about 40 percent as a result of having insurance.” If Medicaid pays hospitals less than their average costs, then inducing additional patient demand by expanding coverage could actually exacerbate hospitals’ shortfalls, not improve them.

To put it bluntly, hospitals made a horrible deal by endorsing Obamacare in 2009. The industry agreed to annual reductions in their Medicare payments forever in exchange for a one-time increase in the number of insured patients. The CBO report quantifies how badly the hospital industry missed its target. Even if hospitals revolutionize their productivity — a standard nonpartisan experts doubt they will achieve — the added revenue from Obamacare’s coverage expansions will barely offset the effects of the Medicare-reimbursement reductions. Under the worst-case scenario, as many as half of all hospitals could become unprofitable within a decade — and the entire industry could face negative profit margins.

The CBO looked over the data and compared it to what hospitals were claiming. They found that there was little effect at all. So little that it makes pretty much no difference in the financial projections of the hospitals. That’s kind of a big deal, because saving the broken health care system in Louisiana, they say, is why we need to expand Medicaid in the state in the fullest sense.

Granted, a smart executive branch in the state wouldn’t even let itself get close to this situation in the first place. But we have John Bel Edwards, who has been as far from a smart executive branch as it gets. We instead have someone who sees this data, will decide it’s not a part of his agenda, and flat out ignore it. It should be heavily considered when making a big push like this, but alas.

This is really about opening up Obamacare further, and getting people off of private insurance, as it always is. You won’t hear anyone on the Left admit that (openly), but that’s what this is.

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