As the state legislature debates expanding Medicaid, the Wall Street Journal recently published a column from a think tank arguing that Medicaid expansion has caused hospital profits to drop, thus Medicaid expansion is bad.
The title of the piece was: “As Medicaid Expands, Hospitals Close.” This was followed by a sub-headline stating: “Ten states have refused to sign up. They should keep resisting the pressure.”
The column was produced by a think tank called the Foundation for Government Accountability, which started in 2011 in Florida and expanded nationally. Their website states: “FGA employs more than 45 marketing, research, and outreach experts with more than 50 on-the-ground liaisons in 30 states, and partners with more than 450 policymakers across the country.”
A conservative friend of mine emailed me the article and asked me what I thought.
Always check the math when talking millions
The article was intriguing but the first thing I noticed was that the math didn’t add up.
The study on which the article was based examined 4,000 hospitals nationwide and found that the expansion of Medicaid caused profits to drop from 6.2 percent of revenue to 1.5 percent. That’s really bad.
But the article also stated that the percent of Medicaid patients rose from 7.8 percent of patients to 14.2 percent of patients and that Medicaid reimbursement is 24 percent under cost.
If Medicaid percent of patients goes from 7.8 to 14.2 percent in expansion, and Medicaid reimbursement is 24 percent under costs, then the profit loss would be 6.4 (14.2-7.8) percent times 24 percent. That's a profit margin decline of 1.5.
So expansion would have caused state margins to decline from 6.2 to 4.7 percent of revenue, not down to 1.4 percent.
Anytime I see such a clear mistake in basic number crunching, it makes me suspicious of the motives of the study. In this case, it was a conservative think tank wanting to produce anti-expansion results. And they did.
As Mark Twain said, there are liars, damn liars and statistics.
Second, the study has no revenue data, only profit data, so it is impossible to know whether the Medicaid revenue is incremental or substitutional (from private pay.) If it is incremental, then to determine whether the Medicaid helped or hurt would rely on whether you are using average cost or marginal costs in your calculation. The study never divulges this.
If people are going off private insurance and onto Medicaid insurance, then it would definitely cause hospital profits to decline. But then that would be a huge savings to employers. It's hard to imagine that people signing up for Medicaid expansion are quitting private pay.
If the hospitals are making money on the uninsured by making them pay cash or for closing on their homes, well that's an issue of whether it's better to have richer hospitals or richer working poor.
So if the hospitals are losing out, the benefit is either going to employers or the working poor.
Medicaid in Mississippi
In Mississippi, we have a different situation in which it's not a question of private pay or Medicaid, it's a question of uninsured having no ability to pay at all, leaving hospitals in poverty areas on the verge of closing without uninsured reimbursement.
Basically rich hospitals in rich states probably do worse with Medicaid expansion in terms of profit margin (as opposed to total profits.) They would have more overall patients on insurance, but the reimbursement rate would be lower because private pay has a higher rate than government reimbursement.
In a poor state like Mississippi, it’s a totally different story, especially in impoverished areas like the Delta.
Unlike rich hospitals in rich states, poor hospitals in poor states have a huge number of uninsured patients that, by law, they are forced to treat even though they can’t pay. In that case any insurance is better than none.
Compounding this problem is the fact that the feds have cut the amount of money it pays hospitals for treating the uninsured. It did so because the Medicaid expansion was supposed to fill in the gap. But for states that didn’t expand, the hospitals in poor areas were left out in the cold. That’s why the Mississippi Hospital Association supports Medicaid expansion and would even be willing to pay higher state hospital taxes to make that happen.
I never supported Obamacare. Still wish we could turn back the clock and pursue a free market approach. But for a poor state like Mississippi, that’s neither here nor there. It’s like whistling into the wind. It’s a waste of time. Not going to happen. Medicaid expansion is here and nothing a conservative like me can do will change that nationally.
Do we take the money?
So now we are left with one last question. Are we going to take the billion dollars a year in federal money or not? Or are we going to be sore losers and stupidly refuse to take the money because we lost? I am far too practical to die on my ideological sword. Mississippi has already turned away 10 billion dollars. How many more billions are we going to snub our noses at before we give in?
As a final point, the state’s Republican establishment is bemoaning the fact that Mississippi’s population is not growing and our percent of citizens in the workforce has declined. It’s one of the worst in the nation.
If you believe in the free market, then it’s perfectly logical that low income workers would leave one state to get better benefits in another state. The fact that the lower middle-class workers can’t get medical insurance surely hurts our workforce development.
The irony is that Republicans fall all over themselves to throw billions of dollars in tax benefits and outright subsidies to big private companies to come to Mississippi. While at the same time, they snub the federal government's desire to give our state billions for low-income workers to have access to healthcare.
Wyatt Emmerich is President of Emmerich Inc., who publishes 22 newspapers across the state, including your Clarksdale Press Register.
