Increasing Medicaid Dependency Does Not Reduce “Uncompensated” Care

Robert Lazsewski is a leading health insurance expert whom I often cite (see, for example, here and here). Unfortunately, in a recent article praising Ohio governor John Kasich he has made a serious error. Gov. Kasich is one of only three Republican governors who took federal Obamacare money to expand Medicaid dependency. According to Mr. Laszewski:

On Medicaid, the Kasich administration helped 650,000 people whose uncovered health-care costs were being shifted onto and burdening employers and individuals struggling to pay their already-high health insurance costs. The administration enrolled them into a new Ohio Medicaid system that made 38 different reforms over five years. In 2015 alone, it saved Ohio taxpayers $1.9 billion compared with the original state-budget target. It held the program’s per capita cost growth below 3 percent while cutting the state’s uninsured rate in half.

The idea that people who cannot pay their hospitals bills are the major problem in driving American health costs is evidence-free. According to a September 2014 report promoting Obamacare’s benefits, the Affordable Care Act would reduce so-called “uncompensated care” by $5.7 billion in 2014. Health spending in 2014 was $3 trillion, so $5.7 billion is less than one-fifth of one percent of national health spending!

Further, Obamacare’s increase in Medicaid dependency does not always help patients. Emergency departments are jammed with both Medicaid dependents and (somewhat less so) privately insured patients.

The only parties helped are hospitals. For them, charity care gets paid by federal taxpayers instead of being written off as a loss. At best, there is zero social benefit to that transfer. It is still charity care, just paid by a different party.

Indeed, there is likely substantial social cost to the transfer, because the burden of paying for indigent patients is shifted from the local community to the federal government. The taxes levied to pay for Medicaid and other federal health spending disappear from the local community, get recycled through the federal bureaucracy, and sent back.

This is surely a far different method of financing local non-profit hospitals than the city fathers and religious orders which founded them had in mind.

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For the pivotal alternative to Obamacare, please see Independent Institute’s book, A Better Choice: Healthcare Solutions for America, by John C. Goodman.