Legislative committees avoid challenging hospital claims

Updated 7 AM 10/5/15

Some Arkansas legislators who run saying they are conservatives voted for Obamacare Medicaid Expansion (currently called “Private Option” in Arkansas). To try to cover their tracks with their base they have tried two excuses for their votes.

First, they said we took a bad program and made it good with conservative tweaks.  That argument has fallen flat because there is little the feds will let us do that is meaningful. Based on U.S. census data, 71.3% are able bodied working age adults with no dependents[i] and 46% do not work (not even part time or seasonal work). [ii] Yet, the feds won’t let states require recipients to get a job!

Second, the politicians argue: “Golly, Medicaid Expansion has problems but we have to keep the program because it “saves” Arkansas hospitals.”  This argument didn’t fool voters in 2014 when a number of incumbents who voted for the program lost their elections!  But, these Obamacare supporters have latched on to the argument; however, no example of a saved hospital has actually been given. Since they are hiding behind this argument they haven’t challenged the assertion.

The claim gives the voters back home the impression that the program is needed to offset the actual cost of providing charity care to low income patients. This is not what it is about.  It is just another revenue source – more taxpayer money in the trough.

Big government legislators need to quit pretending the Obamacare Medicaid Expansion is the conservative thing to do. You at least have to give credit to liberal Democrats for being truthful – admitting they like this big government program.

 Does it actually “save” hospitals?

In 2014, representatives of Arkansas hospitals told the Hospital and Medicaid Study Subcommittee of the Arkansas Legislative Council that elimination of the program could cause some hospitals to close.[iii]  In 2015, hospital representatives told the Health Reform Legislative Task Force the program keeps open a number of hospitals that otherwise would be having significant financial problems.[iv]

The committees just accepted the argument without demanding any examples and without a full analysis of hospital expenses. Politicians who have been hiding behind the hospital argument in order to justify their votes for Obamacare Medicaid Expansion certainly may not want to ask questions.

Instead of showing that the program “saves” hospitals, hospital representatives talk about: (1) offsetting uncompensated care expenses, (2) offsetting cuts in reimbursement in the Medicare program, and (3) the increasing the number of patients with insurance.

Statistically it is a huge leap to say Obamacare Medicaid Expansion (Private Option) is what keeps hospitals open. It is an even bigger leap when you realize “charitable care” for low income people is a very small percentage of hospital expense.

Saving hospitals? Politicians didn’t bother to question the assertion.

Uncompensated Care

Hospitals cite expenses for “uncompensated care” as a justifying need for Obamacare Medicaid Expansion (Private Option).  You may think “uncompensated care” means charity for low income people.  That is not correct. Uncompensated care includes some charity care but also includes bad debt and amounts claimed as underpayment from serving Medicaid patients.

Charity percent“Uncompensated care” is primarily bad debt, which has nothing to do with serving the Medicaid Expansion population.  Advance Arkansas Institute (AAI) noted bad debt “cannot typically be generated by clients who are eligible for Medicaid…[v]

A report by the Arkansas Hospital Association says uncompensated care is 6.51% of hospital expenses.[vi] AAI calculated that only 21% of uncompensated care had been from caring for low income people (charity care). Therefore you can calculate charity care was only 1.37% of overall hospital expenses.[vii]

If charity care is only 1.37% of Arkansas hospital expenditures, then Obamacare Medicaid Expansion (Private Option) is NOT about “saving” hospitals or replacing charity care. It is just more taxpayer money for feed in the trough.

For more on hospital expenses see: Subsidizing hospital expansion with taxpayer “Private Option” money.

Pie-in-the-sky sticker price or actual cost

If you thought “uncompensated care” or even “charity care” would be based on what it actually cost the hospital for a drug, a test or a service, you were wrong.  The number includes a supposed loss for the profit they didn’t make.

arrow-24829_640Many hospital charges include huge markups.

Americans pay higher prices for health care for a number of reasons. One is that some hospitals charge rates far higher than normal in the industry “because they can. – CBS News[viii]

An article in USA TODAY gives examples of hospital sticker shock. Such as the woman who was “charged $71 for one blood pressure pill for which her neighborhood pharmacy charges 16 cents.”[ix]

A tip of the hat to Arkansas Project for reposting this video in which Dr. Keith Smith explains uncompensated care. Dr. Smith says, if a hospital were to charge $100 for an aspirin but receives only $5 from an insurer (still a huge markup), then the hospital would claim a $95 loss as “uncompensated care”. [x]


What was the actual cost of charity care? The legislative committees didn’t ask.

Reduction in number of uninsured

The 2015 report by the Arkansas Hospital Association includes a page titled “Arkansas Private Option: Benefit to Hospitals through June 30, 2014[xi] with a chart labeled “APO Replaces Uninsured Volume.”  The report tries to give the impression that the Private Option single handedly reduced the number of uninsured.

First, insurance does not equal health care…..like saying number of restaurants is up—does not mean the number of folks eating is up

Second, the chart fails to acknowledge increases in insured that are not related to the Private Option.

  1. It omits the increase in the number of people who bought private insurance.  A new report by the United States Census Bureau shows that private insurance increased nationwide from 1% to 66.0%.[xii] The increase may be because of federal mandates instead of a desire to purchase insurance.
  2. It omits those who purchased insurance off the Obamacare Exchange. A footnote far from the graph says: “80% of Arkansas Insurance Exchange patients were estimated to be attributable to APO based on enrollment data provided by the Arkansas Department of Human Services.” That means an estimated 20% of those who got insurance from the Obamacare Exchange were not Private Option recipients.

Did the legislative committees question these hospital claims?  Apparently not.

Need to offset the reduction in Medicare reimbursement

What does the federal reduction in the federal Medicare reimbursement rate to hospitals have to do with whether Arkansas should keep Obamacare Medicaid Expansion and for Arkansas taxpayers to pay the bill through state and federal taxes? Absolutely nothing!

Are hospitals saying the Medicare reductions were unfair to them?  If so, why did the American Hospital Association support Obamacare despite knowing the reductions were included? If the reduction is unfair, lobby Congress for a fix to the problem, instead of dumping the problem on states by insisting they adopt the poorly designed Obamacare Medicaid Expansion?

Trying to justify the additional burden on Arkansas because the feds reduced its Medicare reimbursement rate is proof that hospitals see the Private Option (Obamacare Medicaid Expansion) as just another revenue source.

So did legislative committees balk at the idea that Arkansas should offset Medicare with Medicaid Expansion? Nope.

Will politicians scrutinize the hospital claims?

Arkansas_State_Capitol,_Little_RockThe Health Reform Legislative Task Force hasn’t seemed very interested in challenging hospital arguments or getting complete and accurate hospital information. This is not a surprise for two reasons. First, 14 of the 16 members of the task force either voted for Obamacare Medicaid Expansion in 2013 or voted for Act 47 of 2015 (SB96).  Act 47 of 2015 allowed the program to continue until it will have to be renewed anyway and created the task force with its first listed duty being to look for a way to continue coverage to the Obamacare Medicaid Expansion population.  Second, the Senate chair began the first meeting by urging members to skip a rehash of Arkansas’ Obamacare Medicaid Expansion.

An Arkansas legislative task force studying the state’s Medicaid program for changes to recommend to the governor will fail if “we spend the next six or seven months re-litigating the private option,” task force co-Chairman Sen. Jim Hendren, R-Gravette, said Monday.

At Monday’s meeting, he urged fellow task force members to seek new solutions instead of rehashing old decisions about the state’s private option program. – Arkansas Democrat Gazette.[xiii]

The Task Force even has a consultant, Stephens Group, to help them in their study.  The study has been completed but release to the public has been delayed. Wonder why? Will the Stephens Group study address the hospital claim? Don’t bet on it?

Lacking pressure from voters, it doesn’t appear the task force will seek an accurate analysis of hospital claims. Meanwhile, many politicians want to use the unsubstantiated excuse: “I have to vote for Obamacare Medicaid Expansion in order to save hospitals.”


[i] Genevieve M. Kenney et al., URBAN INSTITUTE: OPTING IN TO MEDICAID EXPANSION UNDER THE ACA: WHO ARE THE UNINSURED ADULTS WHO COULD GAIN HEALTH INSURANCE COVERAGE? 1 (Aug. 2012), available at www.urban.org/UploadedPDF/412360-opting-in-medicaid.pdf

[ii] Foundation for Governmental Accountability calculation based on Census Bureau’s Current Population Survey, 2013 Annual Social and Economic Supplement Uninsured adults ages 19-64 earning less than 138% FPL by state and detailed work status.

[iii] Private-option plan lifts hospitals, legislators told, Arkansas Democrat Gazette, May 16, 2014

[iv] Treating more, say hospitals, Arkansas Democrat Gazette, July 10, 2015

[v] Dan Greenberg and Shane Stacks, “The Cure Is Worse Than the Disease: Why the Private Option Will Hurt, Not Help, Arkansas Hospitals” available at http://www.thearkansasproject.com/wp-content/uploads/2014/02/Stacks-Report-021114.pdf

[vi] http://www.arkhospitals.org/archive/arkhospmagpdf/2015Stats/2015StatisticalInfo.pdf

[vii] Ibid

[viii] http://www.jhsph.edu/news/news-releases/2007/anderson-hospital-charges.html

[ix] http://usatoday30.usatoday.com/money/industries/health/drugs/story/2012-04-30/drugs-can-be-expensive-in-observation-care/54646378/1

[x] http://www.thearkansasproject.com/uncompensated-care-scam-the-story-of-the-100-aspirin/

[xi] http://www.arkhospitals.org/archive/arkhospmagpdf/2015Stats/2015StatisticalInfo.pdf

[xii] http://www.census.gov/content/dam/Census/library/publications/2015/demo/p60-253.pdf

[xiii] Private-option panel is urged to skip rehash, Arkansas Democrat Gazette, April 21, 2015