Hospital Lobby Driving Medicaid Expansion

(Editor’s note: The following is an edited version of Senior Legislative Analyst Jack McHugh’s testimony submitted to the Michigan Senate Government Operations Committee on Wednesday.)

People should understand the real reason we're here today. It's not "to help the poor," or because "Obamacare is the law," or because the reforms the House bill would supposedly require are so awesome.

We are here because a politically powerful special interest stands to collect billions of dollars if this Legislature approves the Medicaid expansion — and it is willing do almost anything to make that happen.

It's explained by the Medicaid expansion "1-2-3":

1. The medical services industry has become far more concentrated due to Obamacare, with a relative handful of big hospital corporations absorbing many formerly independent M.D. practices and clinics. Scott Gottlieb of the American Enterprise Institute reports that "by next year, about 50 percent of U.S. doctors will be working for a hospital or hospital-owned health system." This is making hospitals richer and far more powerful politically.

2. In plain English, what "expand Medicaid" really means is the Michigan Department of Community Health will deliver an additional $2 billion annually to this special interest starting next Jan. 1, mostly in the form of negotiated managed care contracts (think Medicaid HMOs). This increases to more than $3 billion by 2016.

3. These big hospital corporations (both for-profit and nonprofit) will make a lot of money on those contracts. That's why all year long they have been in the face of every state legislator, day after day. (Maybe when this is over some members will reveal the kinds of threats and promises they've been making.)

How powerful is this special interest? So powerful that it can cause Republican political careerists to perform politically unnatural acts like voting to implement Obamacare, thereby helping to prop up a law that is vulnerable on many fronts — legal, political, administrative, technological, it's absurd complexity, it's bizarre perverseness, and more.

What exactly does "vulnerable" mean, given that Obamacare can't be repealed under the current administration? When it fully kicks in on Jan. 1, the mayhem this law inflicts on families, employers and the nation's health care system may be so obnoxious that Congress — including the Democratic-controlled Senate — will be forced to open the law for major amendments that reduce the damage.

This is why those who oppose legislator collaborationism are not "bitter enders." A day may come when active resistance becomes counter-productive, but our core beliefs demand we be slow and grudging in accommodating that day's arrival. That applies to those of you who claim to share those beliefs.

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Given all the above, it's almost an afterthought, but will taxpayers (and Medicaid beneficiaries) get a good value from the managed care contracts this state will deliver if you approve the expansion?

One stark expression of the dysfunctions in the current health care system is the fact that there are no real prices for medical services. This was revealed in a recent Stephen Brill Time Magazine piece, and by the federal outpatient procedure price survey released a few weeks ago. The relevance here is that neither taxpayers nor the state officials who negotiate those contracts will ever really know whether we're getting a good value.

That assumes (as I do) that those officials are earnest and will do the best job they can. But in the end they have to take the word of the providers on the other side of the bargaining table — the same people whose lobbyists fill this room today. This illustrates one of the many ways that Obamacare doubles-down on the current system's dysfunctions rather than doing anything to fix them.

One thing we can know about these contracts is that even with good faith on all sides, such arrangements will never deliver the increased efficiency and "disruptive innovation" so desperately needed in our health care system.

One final point: Back in your districts, many of you have given speeches condemning Washington's spendthrift ways. Well, the money for the Medicaid expansion doesn't come from some earmarked pot to be divvied between the states. It goes right onto the federal credit card.

If you approve the expansion, you will be adding $22.5 billion to the national debt through 2022. So among other things, a vote on this issue will show whether you really meant what you said in those speeches.

Thank you for your attention.