Obamacare

Health Law Produces Hospital Savings, But Startup Costs Run Far Higher

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Whitehouse.gov

The Department of Health and Human Services issued a press release yesterday noting that uncompensated care costs—expenses related to treating uninsured individuals, mostly in hospital emergency rooms—for hospitals are expected to drop about $5.7 billion this year as a result of expanded health coverage under the law. The bulk of the reduction, about 74 percent, is expected to occur in states that chose to Obamacare's option to expand Medicaid. 

That's not nothing, but those supposed savings come at a significant cost. According to a Bloomberg Government report released Wednesday, the startup costs associated with the law and an associated health technology program are much higher than projected by the Congressional Budget Office (CBO) or talked about publicly. The startup tab for Obamacare and a related program to spur electronic health records is over $73 billion so far, according to the report, an amount "substantially greater than what the Congressional Budget Office (CBO) initially estimated health reform would cost by this point," the report notes. A little more than $2 billion went to fund the creation of the federal health exchange. 

Most of the spending accounted for in the Bloomberg Government report is not related to health insurance subsidies under the law. But the money that goes to fund expanded coverage, both for exhange based private plans and Medicaid, is expected to grow substantially over the next several years. Earlier this year, the CBO projected that the federal government would spend about $47 billion on private insurance subsidies, and about $41 billion on Medicaid coverage under the law, next year. That's how much it costs to fund the coverage that HHS is saying is responsible for the $5.7 billion drop in uncompensated care spending. Now, obviously there are a variety of other components of the law, including various taxes and hoped-for Medicare cuts intended to offset the spending on coverage. But the isolated comparison suggests that expanding coverage is not a very effective way to reduce uncompensated care spending. If all we'd wanted was to plug that hole, we could have done so for a lot less.