The Heritage Foundation - Leadership for America

The trumpets are blaring to announce with great fanfare another “historic” political deal designed to give a boost to the sagging fortunes of health care reform and convince the public real progress is being made. Hospitals are linking arms with the Obama Administration and Congressional leaders to announce “savings” of $150-155 billion over the next ten years.

This is a shellgame that should fool no one. According to the Centers for Medicare and Medicaid Services, hospital expenditures between 2009 and 2018 will total $10.5 trillion. So the “savings” represent about 1.5 percent of total income to the hospitals. More than half of hospital income already is generated by government payments. To put $155 billion further into perspective, this is less than the projected $175 billion Disproportionate Share Hospital Payments (DSH) under Medicaid, which are made to hospitals around the country to offset low Medicaid reimbursement rates and care for indigent populations. Medicare DSH payments are worth about another $100 billion over ten years. If everyone is insured, why are DSH payments needed at all? So at a minimum, the hospitals should be “willing” to give up about $275 billion in what will become unnecessary government payments.

Moreover, if everyone is insured, at least some of these individuals will receive care from hospitals, will they not? Currently, about 31 percent of total health care expenditures go to hospitals. If “reform” increases federal spending by $1 trillion and the hospitals get this same 31 percent of the spending, their share will be $310 billion. The hospitals’ “loss” will not only be offset, they will make another $155 billion.

What did Lincoln say? “You can fool some of the people ….”.