Rep. Joe Wilson (R-SC) may have made a fool of himself when he screamed "You lie!" at President Obama during last week's epic health care speech. He certainly earned a slap on the wrist from the House of Representatives for it.

But, in the final analysis, did the White House basically reward his bad behavior?

The answer seems to be yes.

At stake was the question of how the government will ensure that it doesn't provide subsidies to illegal immigrants who are trying to buy health insurance. Originally the various proposals on the Hill emphasized that such subsidies wouldn't be allowed, but they left the precise regulations To Be Determined. The House legislation, for instance, provided that an official at the Department of Health and Human Services would be responsible for writing those rules before the exchanges went live.

After Wilson's outburst, Sens. Max Baucus (D-MT) and Kent Conrad (D-ND) changed the language in the Senate Finance Committee bill to essentially write those rules now, and codify them into law. They sought to provide that all consumers offer proof of citizenship when buying insurance within the exchanges, so that their eligibility for subsidies can be determined. Among people who live below 300 percent of the poverty line, citizens would be eligible for subsidies, and so would many other non-citizen residents, but illegal immigrants would be blocked.

As we reported last week, this is an inefficient way of ferreting out abuse of the system by people in the country illegally. But as it turns out, the White House wants to go event further.

Earlier this week, the New York Times reported that Baucus will do the administration's bidding: "Senator Max Baucus, the Montana Democrat who is leading bipartisan negotiations on health care legislation, on Monday said he would include in his bill a proposal by the Obama White House to bar illegal immigrants from buying health coverage through a new insurance marketplace, or exchange, even if the illegal immigrants were willing and able to pay the full cost."

"NCLR cautioned decision-makers that giving in to the dishonesty of Representative Wilson would undermine U.S. citizens and legal immigrants, and that is what has happened," said Janet Murguía, President and CEO of the National Council of La Raza.

Rep. Luis Gutierrez (D-IL), chair of the Congressional Hispanic Caucus Immigration Task Force, said "The White House has said it stands for comprehensive immigration reform; but you cannot say you want to bring people out of the shadows and then deny them non-government access to health care that they can use their own dollars to purchase."

The administration's decision means illegal immigrants will either have to buy insurance over the counter (the way many of them do today) and pay the same exorbitant premiums, or remain uninsured. They'll be prevented not just from receiving income-based government subsidies, but also from enjoying the benefits of (and contributing to) enhanced competition, and pooled risk, within the exchanges.

On the flipside, hospitals will continue to admit illegal immigrants to emergency rooms, and the government will continue to take the hit when bills go unpaid. And since illegal immigrants are a relatively healthy subset of the population, the cost of health insurance within the exchanges will be that much higher if they're excluded from the risk pool.

But the pay off is that Joe Wilson will be on even shakier ground than he was before if he calls the President a liar again. So I guess it's all a wash!