The White House Admits: Obamacare Won’t Work Like We Promised

Published April 17, 2013

Across the country right now, hospitals are lobbying intensely to convince states to expand their Medicaid programs, increasing the tax burden on their citizens in future years to send billions to providers. The rationale is simple: if you don’t expand Medicaid, the hospitals argue, we’ll be stuck losing other payments from the federal government, known as DSH payments, which are intended to cover the costs of people hospitals must treat regardless of if they have ability to pay.

Stateline reports this morning on the push:

With billions of dollars at stake, hospitals are lobbying hard for Medicaid expansion in Columbus, Tallahassee and other state capitals where state legislators oppose the extension of the program to some 17 million Americans.

Hospital associations have paid for television and newspaper ads, organized rallies, and choreographed legislative testimony in support of the Medicaid expansion, which is part of the Affordable Care Act. They also have united disparate groups which are used to being on opposite sides of legislative debates. In Columbus, for example, Ohio Right to Life and Planned Parenthood Advocates of Ohio are working side-by-side to persuade state lawmakers to approve the expansion. Both groups say they want to make health insurance available to the poor.

In making their case, the hospitals tout the economic benefits that an influx of federal money will bring to the states. The federal government will cover 100 percent of the cost of the expansion for the first three years, gradually tapering off to 90 percent in 2020. And they point to the public health dividends that will come from providing health care to people who can’t afford it now.

But the hospitals also acknowledge that the expansion is vital for their own financial health. “For many hospitals it’s existential; it’s really talking about the future viability of their institutions,” said Shawn Gremminger of the National Public Hospital Association.

Here’s the problem: The White House has already admitted that this approach – cutting DSH payments and expanding Medicaid – won’t work. They admitted this in President Obama’s most recent budget, where the DSH cuts were kicked further into the out years, decreasing the likelihood they will ever materialize.

Michael Cannon explains why this matters:

The president’s latest DSH proposal is a classic “dessert now, spinach later” ruse. To “pay for” this $360 million increase, he proposed cutting DSH payments by that exact amount in 2015 and 2016. He even proposed an additional $3.6 billion cut — in 2023.

3. Hospitals can stop crying poverty.

Hospitals, which lobbied for the PPACA, have been threatening that unless states implement the Medicaid expansion, the Medicaid DSH cuts will lead to layoffs and closures in their districts.

President Obama has rescued the hospital lobby from that self-inflicted wound. The hospitals can no longer use the Medicaid DSH cuts as their boogeyman, because now everyone knows the president will rescind this year’s cuts, and next year’s cuts, and . . .

4. States don’t need to expand Medicaid to protect hospitals.

The Washington Postreports that rescission of the DSH cuts “could make it a bit easier for states not to expand the Medicaid program. If they know the additional dollars are coming in, there’s a bit less worry about turning down the Medicaid expansion funds.” At the same time, the president has undercut expansion supporters by admitting that expanding Medicaid will not reduce uncompensated care.

The president’s budget shows that the brave state legislators who have been fighting the Medicaid expansion in states like Ohio and Florida were right all along — and it makes expansion supporters, like Governors Rick Scott (R., Fla.) and John Kasich (R., Ohio), look rather silly.

Given that the reality of DSH cuts are now very much up in the air, there’s no question that delay is the wise approach for the fiscal future in virtually every state.