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Obamacare’s False Promise to Hospitals

Ever since Obamacare took effect, hospitals have lobbied states incessantly to pass its Medicaid expansion provision. But new research suggests that Medicaid expansion won’t help hospitals and may even harm them.  


 According to a fresh new report from the Congressional Budget Office, Medicaid expansion won’t make hospitals more profitable.  The CBO analyzed Obamacare’s various components and estimated their effect on the financial performance of hospitals.  Some provisions, like its subsidies for private insurance, will somewhat improve their finances.  Medicaid expansion however, won’t make hospitals more financially viable.

The report explains that “Medicaid payments rates are below hospitals average costs” and regularly underpay providers for treating patients on Medicaid. The CBO also noted that patients on Medicaid utilize 40 percent more healthcare than uninsured patients. In other words, Medicaid’s new patients are using a lot more healthcare services and aren’t paying for it.

Yet Obamacare’s impact on hospitals is even worse than these estimates suggest.  Hospitals want Medicaid to expand as a way to offset Obamacare’s cuts to Medicare. In order to pay for the law’s spending explosion, President Obama cuts Medicare’s payments to hospitals, doctors, and nurses by $716 billion over ten years. Hospitals ultimately accepted these cuts because they bought the White House’s line that Obamacare’s Medicaid expansion provision would bring in lots of paying customers. Dan Perdue, President of the Wyoming Hospital Association argues:

“Federal assistance for hospitals that treat large numbers of low-income and uninsured patients has been slashed. The impact of both the dramatic growth in uncompensated care and the reductions in this federal assistance would be significantly offset through the full Medicaid expansion.”

But Mr. Perdue fails to account for how little Medicaid actually compensates providers.  Until recently, Medicaid paid hospitals just 84 cents for every dollar of care they provided, according to the Department of Health.

Then in June, Governor Matt Mead ordered the Department of Health to cut Medicaid’s payments even further.   The Department made a 3.3% across-the-board cut across to all providers.  On top of that, the Department made additional targeted cuts to a variety of providers, including hospitals, nursing homes, and mental health clinics.

If hospitals lose money every time a Medicaid patient walks in, crowding more people onto the program may actually harm them.  Two years after Kentucky opted into Obamacare’s expansion, a study by the Kentucky Hospitals Association concluded: “The government’s success in expanding health coverage has come at a significant cost to Kentucky hospitals.”

The study found that hospitals in the Blue Grass state lost approximately $1 billion since 2013 and will lose another $6 billion by 2024.  Like Wyoming, Kentucky’s Medicaid program only pays hospitals 82% of the actual cost of delivering care.  But unlike Wyoming, Kentucky added 428,000 new underpaying patients to its Medicaid rolls.  

As a result, Kentucky’s hospitals are scaling back in a major way. One survey found that hospitals shed 7,700 positions through layoffs, attrition and abolishing positions since Medicaid expanded.  In addition, four out of ten hospitals shuttered whole divisions, including surgery departments and wound care clinics. And two hospitals have shut their doors entirely.

But let’s put aside the fact that Medicaid expansion won’t help Wyoming’s hospitals and ask a more fundamental question: Do Wyoming’s hospitals need to be helped?

In a word: no. 

Hospitals in the Cowboy state are significantly more profitable than hospitals in other states.  A 2014 analysis by the Department of Health found that Wyoming hospitals make 8.94% in profits every year, while hospitals of similar sizes in the rest of the country make just 2.14-2.9% every year.  In other words, Wyoming’s hospitals are more than three times more profitable than other hospitals.

When it comes to hospital finances, Medicaid expansion is a disaster, masquerading as a solution, to a problem that doesn’t exist.

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Tuesday, 25 July 2017
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