Opinion

ObamaCare Expansion Isn’t Saving Hospitals

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Posted: Oct 26, 2016 12:01 AM
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ObamaCare Expansion Isn’t Saving Hospitals

For years, ObamaCare lobbyists have promised that expanding Medicaid to a new class of able-bodied adults was essential for hospitals’ immediate survival. They warned that, without ObamaCare expansion, hospitals would be headed towards a disaster of biblical proportions. Hospitals – especially those in rural areas – would close and the sick would be left without care. Private health insurance costs would skyrocket. Mass chaos would ensue.

But as it turns out, expanding ObamaCare hasn’t “saved” hospitals. Hospitals in states that expanded Medicaid are doing no better than those in states that didn’t. And there’s at least some evidence to suggest that Medicaid expansion will ultimately put hospitals in a worse financial position over the long run.

Hospital Closings Are Happening Everywhere

Although ObamaCare lobbyists promise that expanding Medicaid is some sort of silver bullet to prevent hospital closures, rural hospitals are closing all over the country, including in expansion states.

Rural hospitals have closed in numerous states – including Arkansas, Arizona, California, Illinois, Kentucky, Massachusetts, Minnesota, Nevada, and Ohio – even after those states opted into ObamaCare’s Medicaid expansion.

Recent research even suggests that hospitals in expansion states have actually closed faster and opened slower than their counterparts in states that rejected ObamaCare.

ObamaCare Expansion Isn’t Improving Hospital Finances

ObamaCare expansion is also failing to make a dent in the financial losses for hospitals, despite assertions that they’ll go bankrupt if states reject billions of dollars in new welfare spending.

Moody’s Investors Services, which collects hospitals’ financial data in order to provide them with credit ratings, recently completed a nationwide analysis of non-profit and public hospitals’ finances. Their conclusion: Medicaid expansion had no effect on cash flow or operating margins. In fact, analysts found “no significant difference” in improved finances among hospitals in expansion states when compared to those in non-expansion states.

ObamaCare Expansion Could End Up Hurting Hospitals

While ObamaCare lobbyists tend to focus exclusively on potential reductions in hospitals’ uncompensated care, Medicaid expansion’s other financial impacts could actually leave hospitals worse off in the long run.

In Arkansas, home of the supposedly innovative and “conservative” version of ObamaCare, this reality is already playing out: 69% of the state’s small, rural hospitals reported losing money in the second year of expansion.

And in New Hampshire, actuaries estimated that Medicaid expansion would reduce uncompensated care by nearly $10 million – but those savings are more than offset by higher costs and lower reimbursement rates.

While higher utilization is expected to bring hospitals another $7 million in new revenue, it’s also expected to bring $23 million higher costs, leaving the hospital and health systems $16 million worse off.

If that weren’t bad enough, the expansion also shifts a large number of able-bodied adults out of private insurance and into Medicaid – meaning hospitals will receive lower reimbursement rates for these individuals. In New Hampshire, this shift was expected to cut into hospitals’ bottom lines by nearly $39 million. Altogether, hospitals and health systems in New Hampshire are projected to be worse off – to the tune of more than $47 million – as a result of Medicaid expansion.

Bottom Line: Medicaid Expansion Isn’t A Silver Bullet

It’s true that hospitals have managed to shift some operating costs onto taxpayers, thanks to the influx of billions of new ObamaCare dollars, derived from national debt. But that massive flow of money hasn’t produced the new utopian era of hospital bliss that so many supporters promised.

Hospital finances are complicated, partially by design. But a holistic look at the impact of ObamaCare expansion reveals that expanding Medicaid to a new class of able-bodied adults hasn’t put hospitals in a better financial condition, hasn’t eliminated the risk of rural hospital closures, and could ultimately end up hurting hospitals’ bottom lines.