True cost of Medicaid is 2X headline cost?
I recently attended a talk by the CEO of a hospital with $2.6 billion in annual revenue. She noted that patients on Medicaid are 40 percent of the census and that Medicaid pays only 50 percent of the cost of treatment. In order to at least break even at this not-for-profit, therefore, she has to charge privately insured patients enough extra to make the books balance.
(A doc who was formerly Physician-in-Chief of this hospital and then president of another hospital said “you can’t make money doing research” and, financially at least, “teaching is hopeless”.)
This might explain why apparently healthy people are paying such big premiums. “Employer Health Insurance Is Increasingly Unaffordable, Study Finds” (nytimes):
A relentless rise in premiums and deductibles is putting insurance out of reach for many workers, especially those with low incomes.
Instead, she quit her job last summer so her income would be low enough to enroll in Medicaid, which will cover all her medical expenses. “I’m trying to do some side jobs,” she said.
The average premium paid by the employer and the employee for a family plan now tops $20,000 a year, with the worker contributing about $6,000, according to the survey. More than a quarter of all covered workers and nearly half of those working for small businesses face an annual deductible of $2,000 or more.
Annual Medicaid spending is supposedly roughly $600 billion per year, about 3 percent of GDP. But if hospital-related charges are the majority of Medicaid costs and, in fact, the hospitals are recovering half of their expenses from unrelated privately insured patients, the true cost of Medicaid to Americans is closer to $1 trillion per year (about 5 percent of GDP, meaning that people who work 40 hours/week have to stay at work on Friday from 3-5 pm to pay for Medicaid).
Note that this off-books funding for Medicaid is done in a regressive manner since the money is extracted silently from all Americans with employer-affiliated or other private health insurance. I.e., the cost of a health insurance policy also contains a hidden tax to pay for about half of Medicaid (and also to pay for the uninsured who throw out the hospitals’ $100,000+ bills?).
[Anecdotally, we know plenty of folks in Massachusetts who are careful to refrain from earning more W-2 wages than the thresholds for public housing and MassHealth (Medicaid) eligibility.]
Related:
- “Comparing health care costs to median income” (2010): “health care for a small family is likely to consume 100 percent of the after-tax income of a typical U.S. worker”
- About half of immigrant households are on Medicaid, so as the U.S. welcomes more immigrants, the percentage of Americans on Medicaid should increase.
