Medicaid ‘double whammy’

Hospitals in states that don’t expand their Medicaid program as outlined under the Affordable Care Act are facing significant revenue reductions due to regulations that will reduce some Medicare and Medicaid payments in 2014, measures that were written into the law to help pay for the expansion of the insurance program for the poor.
In Texas, where both Republican Gov. Rick Perry and the state legislature have adamantly resisted any notion of expanding Medicaid, the total financial hit for the state is expected to be about $100 million over the next 10 years, according to John Hawkins, senior vice president for government relations for the Texas Hospital Association.
“I think this is going to be difficult,” Hawkins said. “We are already digesting nearly $700 million in state cuts to Medicaid. When you layer on top of that the federal Medicare cuts and the (disproportionate share payment) cuts, the fiscal picture is pretty bleak.”
The impact on individual hospitals in the state could be dire, and may result in some hospitals needing to close suggested Hawkins and Ernie Sadau, president and CEO of Dallas-based Christus Health.
“I do believe in those states that don’t expand the program, that individual hospitals and systems that are smaller than ours, may be faced with closing,” Sadau said.
That seems an unlikely scenario for Christus, which operates nearly 60 hospitals in Texas, Louisiana, Missouri and Georgia. But the impact to revenue from hospitals in Texas and Louisiana (another state that is unlikely to expand Medicaid) would be severe: a revenue reduction of nearly $700 million over 10 years.
Christus, a Catholic, non-profit health system, provides between $400 million and $500 million of charity care every year since it provides care to anyone who shows up at one of its facilities whether they have the ability to pay or not.
Sadau said that when the ACA was passed, Christus anticipated the additional revenue generated by the newly insured so the health system saw the health law as an opportunity to further expand its services. But expansion plans are now on hold as management tries to grapple with how to maintain the current level of services in the face of lost revenues.
“We are working to see what contingency plans we can put in place and how this affects us,” noted Sadau, while also adding, “I don’t have all the answers.”
In Florida, the situation is not much better. Earlier this year, in a reversal of his earlier position, Republican Gov. Rick Scott announced that he would seek to expand Medicaid in his state only to see it blocked in committee in the Florida House.
According to Bruce Reuben, president of the Florida Hospital Association, the objections among state lawmakers are largely based more on ideology and opposition to ACA than about economic reality.
“In addition, there are some who argue against Medicaid expansion saying that the federal government won’t stick with their commitment,” Reuben said. “But that isn’t borne out in the history of the program. Since the very first day of the Medicaid program, the federal government lived up to its commitment of the federal match. They have never broken that commitment.”
Yet despite the apparently bleak outlook in their states, both Reuben and Hawkins share some optimism that their states will eventually find some way to expand coverage. In order to make the case for expansion, they are touting the benefits of expanding to the broader economies of both states.
“Our estimating conference here in Florida estimated (expansion) would bring in $51 billion to the state,” Reuben said. “You can just imagine how much good that would do for Florida’s economy.”
In Texas, a comprehensive study of the potential impact of Medicaid expansion painted a similar picture. According to Waco, Texas-based economic and financial analysis firm Perryman Group, the first 10 years of Medicaid expansion would produce a net gross product increase of more than $255 billion.
“Our best strategy right now is at the grassroots,” said Hawkins. “We need to get away from the mechanical story and the financial impacts to hospitals and instead get the message out to individual legislators and business people about the overall economic impact to the state.”