OCPA column: Hospitals raised prices after Medicaid expansion

Hospitals raised prices after Medicaid expansion

By Kaitlyn Finley

A new study shows that a key claim made by Medicaid expansion advocates is likely false.

Part of the sales pitch for Obamacare’s Medicaid expansion, which is being pushed in Oklahoma in the legislature and with a ballot measure, is that it will reduce medical bills. The argument goes like this: when hospitals treat some people for free, they have to charge everyone else more. This is called “cost shifting.” Expanding Medicaid means hospitals will have to offer less charity care, and should be able to reduce prices.

Yet many Colorado hospitals increased prices despite receiving more reimbursement payments from taxpayers after Medicaid expansion, according to a state report.

The analysis from the Colorado Department of Health Care Policy and Financing found that hospitals’ margins per adjusted patient discharge for all payer types, including Medicare, Medicaid, and the privately insured, more than doubled from $538 to $1,359 from 2009 to 2017. The state report reveals that hospitals spent their increasingly subsidized revenues on building more hospitals, particularly in metropolitan areas, on buying out physician practices, and on further consolidating hospital systems.

The report finds that these new expansion projects were focused in areas that did not need more medical facilities. “New construction seems to correspond to the regions that do not need new facilities nor new hospitals, with new hospital construction concentrated largely in the higher income areas of Colorado, such as Longmont/Boulder.” The construction was focused on these lucrative areas and largely ignored lower-income areas.

According to the report, “Hospitals could have passed on significant savings to commercial consumers had they matched national cost benchmarks using Medicare Cost Reports[,] suggesting as much as 8.3 percent in cost savings or $7.9 billion from 2009 to 2017.”

In response to these findings, Kim Bimestefer, executive director of the Colorado Department of Health Care Policy and Financing, told Kaiser Health News, “Hospitals had a fork in the road to either use the money coming in to lower the cost-shift to employers and consumers or use the money to fuel a health care arms race. With few exceptions, they chose the latter.”

Colorado’s experience shows why throwing billions of taxpayer dollars at a broken and opaque health care system by expanding Medicaid will not serve to improve health care—or lower costs—in Oklahoma.

Kaitlyn Finley is a policy research fellow at the Oklahoma Council of Public Affairs.