ObamaCare Light?



We recently reported that House Republicans introduced an alternative plan to ObamaCare in a Ways and Means budget hearing. Our initial analysis concluded the alternative was little more than a reactionary spending plan that benefited hospitals much more than people. Some hospital administrators, however, were extremely pleased with the plan. “We support Medicaid expansion, but this is another way,” noted Howell Clyborne, a Vice President at Greenville Hospital System. “It puts revenue into the hospitals.” Mr. Clyborne gets credit for both the honesty and accuracy of his remark.

But here’s a question worth asking: Why should the state pump money into hospitals – currently the price tag is set at $62 million in recurring funding – instead of returning that money to taxpayers so that they can make their own decisions about where to go for health care?

The answer is simple. Hospitals and the federal government reached a compromise to pay for Medicaid expansion through ObamaCare, which according to the South Carolina Hospital Association, included hospitals agreeing to “significant reductions in Medicare reimbursement and Medicare and Medicaid Disproportionate Share (DSH) funds [from the federal government] that provide financial assistance to hospitals for uncompensated care provided to uninsured patients.” Since the Supreme Court ruled that the federal government could not force states to expand Medicaid, hospitals could not be 100 percent certain that they would in fact get what they bargained for with the federal government.

However, South Carolina is more than willing to make good on the federal government’s end of the deal with hospitals. A provision put forward by the the House GOP (and supported by the governor) would allocate $20 million ($14 million of which comes from the federal government) to rural hospitals for uncompensated care.

But that’s just the beginning. As usual, when government intervenes in what should be a free market transaction – the purchase by taxpayers of goods and services from government – things get complicated and a whole lot of middle men begin to get paid before taxpayers even start to receive what’s supposedly intended for them.

In this case, here’s how that looks:

  1. State government gives $20 million to cover uncompensated care for rural hospitals.
  2. Fine, but since hospitals are now receiving 100 percent reimbursement from the government for treating uninsured persons, they (the hospitals) will be tempted to attract as many patients as they can – or at least fail to properly discourage over-treatment or treatment for insignificant reasons. So the government gives $35 million to hospitals to direct poor patients to federal clinics.
  3. Ah, but that creates a problem. The clinics may be too few in number or have insufficient capacity to treat the influx of new patients. So the government must spend money on the clinics, too – in this case, lawmakers reckon an even $10 million will do.

Who are the winners in this scheme?

Hospitals (and their lobbyists) would benefit the most if Medicaid were expanded (under ObamaCare) because of the massive injection of taxpayer money that would entail. But they would also benefit from this “alternative” plan. And in what one might assume to be the result of an alliance between the hospitals’ lobbyists and those of the federal clinics, federal clinics are also given an additional $10 million. So in the end, hospitals get taxpayer money to send poor patients to taxpayer-funded clinics.

As always, when the government steps in to offer alternatives to other government-imposed programs, there are obvious losers. In this case, taxpayers are on the losing side. Unfortunately, the “alternative” to Medicaid expansion emulates the same failed policies of ObamaCare and welfare programs in general: throwing money at a problem while disregarding any other practical solutions. Spending $83 million on this plan to “get revenue into the hospitals,” as the hospital administrator aptly put it, obligates taxpayers to pay at least that much every year. When the federal funds are no longer available, state lawmakers will likely fall to political temptation and make up those funds with more state dollars – dollars we don’t have. In the end, taxes will have to be raised to keep the scheme alive.

But here’s the most important point about ObamaCare Light, as this plan could accurately be called. It does nothing to help people get better access to health care. Giving more compensation to hospitals to cover uncompensated care and to send poor patients to clinics may help hospitals to keep functioning without making their own budget cuts, but does not help the sick. In fact, rural hospitals are given no incentive to promote healthier lifestyles since they know they’ll be compensated in full whether or not their patients can pay for it. Furthermore, the ObamaCare Light plan doesn’t do anything – indeed, doesn’t even claim to do anything – to lower healthcare costs or health insurance premiums.

While ObamaCare Light may not spend as much money as another expansion of Medicaid eligibility, it is still more government spending and an expansion of government power over the people.

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