Hospitals may be some of the biggest winners of the Medicaid expansion: USA Today reports that facilities in states that expanded Medicaid have saved billions. The savings come from the decline in so-called “uncompensated care,” in which hospitals absorb the costs of treating patients without insurance. With more people covered through Medicaid, uncompensated care costs for hospitals have plummeted by $5 billion. That’s twice the savings enjoyed by hospitals in states that didn’t expand ($2.4 billion).It may seem like this is a win-win for consumers as well as hospitals. Consumers get the peace of mind and financial assistance that comes with insurance, and hospitals get reimbursed for the care they provide. Not so fast. When you zoom out a bit, it becomes clear that there are downsides to favoring hospitals as much as our health care system does. They charge exorbitant rates for procedures and are actively engaged in blocking competition and acquiring independent practices, thereby raising prices even more. Here’s Reihan Salam in a recent Slate piece on why hospitals are one of the biggest reasons American health care is so expensive:
Avik Roy, a senior fellow at the Manhattan Institute and a conservative health reform guru, has observed that although the average hospital stay in the world’s rich countries is $6,222, it costs $18,142 in the U.S. Guess what? Spending three times as much doesn’t appear to yield three times the benefit […]As for why hospitals charge such high prices, it’s fairly simple: They do it because they can. In a competitive market, a provider who jacks up prices risks losing customers to competitors who charge less. But what if incumbent providers have the political muscle to keep competitors out of the market? What if regulators look the other way when incumbent providers buy up the competition, or even help the process along? That, in a nutshell, is the situation with America’s hospitals, as Chris Pope outlines in a recent Heritage Foundation paper on consolidation in the health care market.
Viewed this way, the savings from the Medicaid expansion are acting as a kind of subsidy for hospitals. And even though hospitals are saving big on uncompensated care, these savings don’t seem to be in any way benefiting consumers themselves.The ACA doesn’t just indirectly reward hospitals by expanding Medicaid expansion and cutting uncompensated care; it helps them in all sorts of ways. That may benefit some Americans in the short-term, but in the long term, the way forward on health reform is to make care cheaper by breaking up the hospital monopolies—not taking the current hospital structure as a given and funneling more money and people into it.