The Editors did a nice job earlier this week explaining the fiscal irresponsibility of Ohio governor John Kasich’s proposal to participate in Obamacare’s expansion of Medicaid. There are some additional points to make, which I discuss at length on my Forbes blog today:
1. Kasich covertly collaborated with progressive activists. Kasich knew that conservatives would criticize his decision, and that any Medicaid expansion must first pass the Ohio legislature. In order to limit the political fallout, Kasich worked with union-backed, pro-Obamacare activists to generate positive headlines and editorials supporting the Medicaid expansion.
2. Ohio hospitals lose more money on Medicaid than they do on the uninsured. The common, and false, refrain from the pro-Obamacare side is that expanding Medicaid will help hospitals, because they will lose less money on uncompensated care for the uninsured. But in 2010, Ohio hospitals lost $1.3 billion on Medicaid, because Washington pays Columbus 83 cents for every dollar Ohio spends caring for Medicaid patients. Hospitals only spent $1.1 billion on charity care for the uninsured, a number that overstates the problem, given that one-third of Ohioans who were eligible for Medicaid, pre-Obamacare, never bothered to sign up.
3. Expanding Medicaid increases premiums on people with private insurance. When hospitals lose money on Medicaid and Medicare patients, they make up the difference by raising rates on people with private insurance, a phenomenon known as “cost-shifting.” As a result, expanding Medicaid will force hospitals to lose even more money on these patients, forcing them to further raise rates on the privately insured.
Making private insurance costlier, in turn, will lead more employers to drop health coverage, leading to more people on government-sponsored health insurance, which means hospitals will lose even more, which will force them to raise rates even more on the privately insured . . . the classic definition of a vicious cycle.
— Avik Roy is a senior fellow at the Manhattan Institute and the author of The Apothecary, the Forbes blog on health-care and entitlement reform. You can follow him on Twitter at @aviksaroy.