The Obamacare ‘Bailout’ Conservatives Don’t Want to Talk About

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Patient Luis Gutierrez, right, talks with Dr. Javier Hiriart at Camillus Health Concern, Wednesday, June 27, 2012, in Miami. (AP Photo/Lynne Sladky)

Patient Luis Gutierrez, right, talks with Dr. Javier Hiriart at Camillus Health Concern, Wednesday, June 27, 2012, in Miami. (AP Photo/Lynne Sladky)

In recent months, conservative opponents of the Affordable Care Act seized on an issue that they were sure was going to be a big winner for their cause: the “Obamacare bailout.” The Weekly Standard’s Jay Cost wrote that “conservative thought leaders have begun to sound the alarm” about a “bailout [that] could feasibly run into the tens of billions of dollars.”

The narrative was built on two relatively obscure provisions of Obamacare: “risk corridors” and “reinsurance.” The short version is that the law contained provisions which would protect insurers from losses in the early years of the ACA if it didn’t function as intended. Think of it as a kind of insurance for insurers — they pay into a pool that would help spread a single company’s big losses across the whole industry. (A detailed explanation of what those terms mean can be found here.)

Jonathan Chait, calling the talking point a “new Death Panel,” argued that it was a cynical attempt to capitalize on the fact that “’bailout’ may be the single most unpopular policy concept in American politics.” But despite conservatives’ high hopes, the narrative died an untimely death last week, when the Congressional Budget Office (CBO) projected that the provisions will actually make the government around $8 billion in profits — it’s a reverse bailout if anything. (This followed the speedy demise of another widely touted claim that the CBO projected Obamacare would cost the economy two million jobs.)

But in a new twist, Republicans in some states that refused to expand Medicaid under the ACA are being forced into their own “government bailout.” Slate’s Dave Weigel explains:

When Democrats predict that the GOP will eventually have to embrace the Affordable Care Act, they usually start with the plight of rural hospitals. In the 25 states that have accepted the Medicaid expansion, these hospitals are taking in reimbursements when they cover the indigent who are newly covered. In the 25 states that haven’t—no reimbursements. Red states (and red-run blue states like Wisconsin) first embraced the Supreme Court decision that made Medicaid expansion optional, and saved them from putting up 10 percent of the cost of a new annual entitlement. But the costs of doing nothing are burning up the plains.

How can a Republican governor fix this problem without accepting the Medicaid expansion? Ray Henry and Christina Cassidy explain: They’ve trying to bail out hospitals within the states. In South Carolina the state has agreed to reimburse 100 percent Medicaid spending at distressed hospitals. In Georgia the Republican charged with this year’s budget is looking at a bailout worth “tens of millions of dollars.” In Mississippi, Gov. Phil Bryant wants $4.4 million for a bailout.

The refusal to expand Medicaid remains a triumph of ideology over good governance. Many of the states refusing the expansion are among those with the highest rates of uninsured citizens. According to the Kaiser Family Foundation, the refusals will leave around five million people who earn too little to qualify for the ACA’s insurance subsidies and fail to qualify for states’ existing Medicaid programs in a “coverage gap.”

Ironically, to the degree these states have to bail out their rural hospitals with state dollars, it’s also the antithesis of fiscal conservatism.

Joshua Holland was a senior digital producer for and now writes for The Nation. He’s the author of The Fifteen Biggest Lies About the Economy (and Everything Else the Right Doesn’t Want You to Know about Taxes, Jobs and Corporate America) (Wiley: 2010), and host of Politics and Reality Radio. Follow him on Twitter: @JoshuaHol.
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