The health-care sector seems to believe they have a God-given
right to consume at least one-sixth of the economy (and growing).
As Republicans prepare legislation to
repeal Obamacare, the health care industrial complex has raised a host of
concerns. Notably, two hospital associations recently released a report
highlighting the supposed negative implications of the reconciliation bill
Congress passed, and President Obama vetoed, late last year.
While the hospitals allege that repealing
Obamacare would decimate their industry, their report cleverly omits four
inconvenient truths.
1. They Pushed Bad Ideas
Because They Expect Bailouts
In August 2010 at an American Enterprise
Institute forum, then-Medicare actuary Rick Foster engaged in a discussion with Chip Kahn, president of the
Federation of American Hospitals, about the effects of Obamacare. The
non-partisan actuary asked Kahn a simple question: Why did his industry agree
to a series of so-called productivity adjustments, which lower hospitals’
Medicare reimbursement rates every year forever, in exchange for a one-time
increase in their number of insured patients?
Kahn gave a simple, yet cynical, reply:
“You could say, did you make a bad deal, and fortunately, I don’t think I’ll
probably be working after 2020 [Laughter.]….I’m glad my contract only goes
another six years. [Laughter.]”
Fast-forward those six years to earlier
this fall, when the Congressional Budget Office (CBO) analyzed
the effects of various Obamacare provisions on hospital margins. The report
concluded that even under the best-case scenario—in which hospitals achieve a
level of efficiency non-partisan
experts doubt they can reach—the revenue from Obamacare’s coverage
expansions will barely offset the negative effects of the productivity
adjustments. Under the worst-case scenario, more than half of hospitals could
become unprofitable by 2025, and the entire industry could face negative profit
margins.
Responding to the CBO report, the
Federation of American Hospitals put out a statement
from none other than Chip Kahn, wailing that “Medicare cuts are taking a
punishing toll on the hospitals that serve all of us.” Translation: “Save me
from my own stupidity—and the bad deal I cut six years ago!”
Kahn knew full well in August 2010 that
Obamacare would eventually decimate his industry, through the cumulative effect
of year-over-year reductions in Medicare payments. The laughter during his
comments demonstrates Kahn thought it was one big joke. He and his colleagues
cynically calculated first that they wouldn’t be around when those payment
reductions really started to bite; and second that Congress would bail the
hospitals out of their own bad deal—essentially, that hospitals are “too big to
fail.”
2. Hospitals Supported Raiding
Medicare to Pay for Obamacare
Last year’s reconciliation bill essentially
undid the fiscal legerdemain that allowed Obamacare to pass in the first place.
In the original 2010 legislation, Democrats used savings from Medicare both to improve the
solvency of Medicare (at least on paper) and to fund the new entitlements.
The reconciliation bill would have repealed
the new entitlements, and—in a truly novel concept—used Obamacare’s Medicare
savings to…save Medicare. Instead, the hospital industry wants to continue the
budget gimmickry that allows Medicare money to be spent twice and used for
other projects.
3. Hospitals Believe
Entitlements Are for Them, Not You
Last year, researchers from MIT released a
major paper
using the Oregon Health Insurance Experiment—in which winners of a random
lottery won the right to Medicaid benefits, while others did not—to calculate
the utility of Medicaid coverage. The study found that most beneficiaries
valued their coverage at between 20 and 40 cents on the dollar. In other words,
if given the choice between Medicaid coverage valued at $3,000 and cash in the
amount of $1,500, most beneficiaries would take the cash.
In theory, individuals receiving cash
contributions in lieu of Medicaid coverage could improve their health in all
sorts of ways—buy healthier food, obtain transportation to a higher-paying job,
move to a better apartment closer to parks and recreation. But who would object
to giving patients cash to improve their health instead of insurance? You
guessed it: Hospitals.
Hospitals view Medicaid as their entitlement,
not their patients’. That’s why hospitals have worked so hard
for Obamacare’s Medicaid expansion. It’s also why they wouldn’t support
diverting money from coverage into other programs (e.g., education, housing,
nutrition, etc.) that could actually improve patients’ health more than
insurance, which has been demonstrated not to improve
physical health outcomes.
4. Insisting Health Care Is Their
Personal Jobs Program
Hospitals will claim that repealing
Obamacare will cost industry jobs, just as they pushed for states to expand
Medicaid as a way to create jobs. But economic experts on both sides of the
aisle find this argument frivolous at best. As Zeke Emanuel, a former Obama
administration official, has noted:
“Health care is about keeping people healthy or fixing them up when they get
sick. It is not a jobs program.”
Likewise, conservative economist Katherine
Baicker has questioned
“The Health Care Jobs Fallacy.” All spending will create jobs, one way or
another. After all, if you’re looking to keep people employed, paying them to
dig ditches and fill them in again will do the trick. But Baicker notes that
it’s a far different thing to argue that health care represents the best
and most efficient use of resources—better than, say, building roads and
bridges, lowering taxes, or even repaying the deficit.
The health-care sector seems to believe
they have a God-given right to consume at least one-sixth of the economy (and
growing). Rebutting hospitals’ argument—that they, and only they, can create
jobs—might represent the first step in lowering health costs, which would help
non-health sectors of the economy grow more quickly.
Jacobs is
founder and CEO of Juniper Research Group, a policy consulting firm based in
Washington. He's on Twitter @chrisjacobshc.
