Buried deep within President Obama’s $3.77 trillion budget is a tiny little proposal to increase Medicaid spending by $360 million. In a budget as large as this one, $360 million is scarcely worth mentioning. It amounts to less than one-hundredth of one percent of total outlays. But this 0.01 percent is worth mentioning, because it proves the president’s health-care law will not work.

While many uninsured patients pay their medical bills, the Medicaid program offers “disproportionate share hospital” payments to hospitals that treat lots of patients who don’t.

The president’s Patient Protection and Affordable Care Act cuts Medicaid’s DSH payments, beginning with a $360 million cut in 2014. The theory went like this: When the PPACA begins reducing the number of uninsured, hospitals won’t need those subsidies. In his budget, however, President Obama proposes to increase Medicaid DSH payments by $360 million in 2014, effectively rescinding next year’s cut. This deceptively small item has far-reaching significance. With this proposal, President Obama has admitted that:

1. The PPACA is not likely to reduce uncompensated care in 2014.

A central argument in favor of the PPACA was that it would end the “hidden tax” that uninsured individuals impose on the insured.

Supporters claimed that hospitals shift the cost of treating the uninsured to private insurers, which increases premiums for a typical family by more than $1,000 — a wild overestimate, but I digress. They argued that the PPACA’s Medicaid expansion and health-insurance “exchanges” would extend coverage to some 30 million previously uninsured people, thereby eliminating that hidden tax and enabling Congress to reduce DSH payments.


Michael F. Cannon

Michael F. Cannon is the Cato Institute's director of health policy studies.
 
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