A peek inside the numbers of the hospital endorsement

Among the ostensible motivations for health-care reform, cost savings from treating the uninsured ranks the highest and most understandable.  Reformers argue that the uninsured wind up in emergency rooms, getting the most expensive treatment possible, leaving hospitals and taxpayers on the hook for their care.  Moving the uninsured into coverage and clinics would save hospitals so much money that we could pay for large-scale government systems without increasing costs to society.

That sounds reasonable.  But is that true?  The New York Times looks at the numbers behind the endorsement of ObamaCare by hospitals, where a nugget of information contradicts the notion that this small minority of Americans creates that much of a problem:

Now a cost-benefit breakdown quietly posted on the Web site of the Tennessee Hospital Association helps fills in the answer.

The breakdown estimates that the industry will receive additional money of about $171 billion over those same 10 years as a result of reimbursements for newly insured patients who would be covered under the overhaul plan. In other words, the hospitals would give up $155 billion in cost cuts, but take in $171 billion in new money — a net gain of $16 billion.

What’s more, the Tennessee association notes that the deal delays most of the industry’s cost givebacks until the second half the agreement’s 10-year year period — well after the hospitals have enjoyed some of the benefits of the new money they’re expecting from expanded insurance coverage.

That may explain why hospitals like ObamaCare.  They get a nifty profit off of it.  And to gain that profit, they only have to trade a small portion of their proceeds anyway:

President Obama has praised the hospitals’ cooperation, and some policy analysts argue that securing their support was politically valuable. (The administration struck another parallel agreement with powerful drug industry lobby.)

But some experts wonder at the price of that political support. Alain Enthoven, a health economist at Stanford University, noted that $155 billion was only about 1.5 percent of total hospital revenue over 10 years — even before taking into account the new, larger amount of money that hospitals can expect if more people have insurance.

Wait — the money they will give back only amounts to 1.5% of their revenue?  That would make the $171 billion they receive for reimbursements about 1.7% of their projected revenue.  What happened to the vast costs that the uninsured create specifically for hospitals as a result of their inability to pay?  Even at the more modest projections of the number of uninsured (14 million), they comprise at least 4% of the population.  Their portion of revenues (unrealized) at hospitals doesn’t even amount to their representation in the population as a whole.

Reformers want us to overhaul a system that works for most Americans, which satisfies most Americans, in order to account for an unrealized 1.7% of hospital revenues.  That’s absurd.

Blowback