The Obamacare Medicaid expansion debate continues in the states, and many hospitals are lobbying their state lawmakers to accept the expansion.

The hospitals argue that because Obamacare cut their payments for charity care—so-called disproportionate share hospital (DSH) payments—they need their states to expand Medicaid coverage so as to increase the number of insured patients to make up for the loss of DSH payments.

But this argument is faulty for a variety of reasons; here are the three main ones:

  1. DSH payments through 2015 will not be based on whether a state expands Medicaid. The Obama Administration has recently released a proposed rule to allocate the first two years of DSH cuts using the most recent data on state uninsured rates. That means that the allocation will not vary based on whether states have agreed to expand Medicaid next year.
  2. Even under the planned DSH payment cuts, most hospitals will still be profitable. For instance, in Ohio, a recent investigative study reported data extracted from tax filings by 88 Ohio hospitals and hospital systems, finding that the vast majority would remain profitable even without any charity care offsetting payments. The investigators found that “26 reported no direct offsetting funds for charity care,” only 16 “reported negative revenue minus expenses—or would have, absent charity care offsets,” and only 30 “reported charity care offsetting funds that exceeded 1 percent of their total revenue.” Lawmakers in other states would be well advised to conduct similar investigations and compare the facts to what they are hearing from hospital lobbyists.
  3. There is ample money for charity care. Contrary to the “poor mouthing” that state lawmakers hear from their hospitals, there is, in fact, plenty of money in the system, though much of it is currently misallocated. A report by the Government Accountability Office (GAO), based on 2007 data, found that “41 states made DSH payments to 717 hospitals that exceeded the individual hospitals’ uncompensated care costs as calculated by the auditors” (emphasis added). Furthermore, the GAO separately reported that, in addition to DSH payments, hospitals also receive billions more in other (non-DSH) supplemental Medicaid payments.

The hospitals made their deal with Congress and the Obama Administration, not with state lawmakers. If they now have a complaint, they should take it to Washington. Their problem is with Obamacare, not with the states.