Local hospitals are facing millions of dollars in cost increases for providing care to the poor and uninsured as Medicaid reimbursements are set to be cut under the Patient Protection and Affordable Care Act.
Disproportionate Share Hospital, or DSH, adjustment payments to hospitals for treating patients with no insurance will be reduced by 75 percent across the board beginning in 2014, then cut incrementally each year through 2020 for a total reduction of $18.1 billion.
Under the original auspices of the Affordable Care Act, expanding Medicaid to all those at 138-percent of the federal poverty level — about $23,000 annually for a family of four — was intended to help offset the cuts by decreasing the demand for so-called uncompensated care.
But the U.S. Supreme Court ruled last year that each state has the right to determine whether to expand Medicaid or opt out, and Ohio Republican Gov. John Kasich has yet to reveal his intentions, although he’s expected to give some indication in the two-year state budget he’s expected to propose early next month.
Republican governors in Arizona, Nevada, New Mexico and North Dakota have already decided to support expansion of Medicaid to their poor residents under President Barack Obama’s health care law.
“The way the legislation was written, it (Medicaid expansion) was never really meant to be separated out the way the Supreme Court ruled,” said Bryan Bucklew, president and CEO of the Greater Dayton Area Hospital Association. “The cuts are going to happen whether states expand Medicaid or not. And (uninsured) patients are still going to access medical services through the emergency department.”
Statewide, the net loss for providing care to the uninsured — or the difference between the total cost and reimbursements — has risen by about 32 percent from 2008 to $1.2 billion last year, according to figures reported to the Ohio Department of Job and Family Services.
The net loss for hospitals in Montgomery County was $225 million in 2011, Bucklew said.
“The hospitals aren’t necessarily loosing $225 million, but that’s how much is probably getting cost-shifted,” he said, noting that increased care costs and lower reimbursements will ultimately lead to higher premiums and out-of-pocket costs for those with private insurance.
“It places a greater burden on the hospitals, which in turn places greater emphasis on cost-shifting, which means people will be paying higher rates for procedures to cover the cost of all these other things that aren’t being covered,” he said. “If you expand Medicare eligibility, you’re going to cover more people who previously didn’t have coverage. And that will at least help stabilize the reimbursement system.”
Bucklew was among number of health care professionals and hospital administrators who encouraged Kasich to expand Medicaid in a letter to be published Sunday in the Dayton Daily News. The letter features contributions from the CEOs of CareSource, Kettering Health Network, Premier Health Partners and the Children’s Medical Center of Dayton.
“We encourage Ohio lawmakers to make the right choice for the people and businesses in Ohio. We all benefit from allowing low-income Ohioans to get the health care coverage they need. It makes strong business sense, and simply put, it is the right thing to do,” the letter reads.
Expanding Medicaid in Ohio under the law would reduce the number of uninsured by 463,000 from 2014 through 2022, according to a recent study by the Health Policy Institute of Ohio. Without an expansion, the number of uninsured would drop by just 259,000 over the same period. About 2.2 million Ohioans are currently enrolled in taxpayer-funded Medicaid program.
Those numbers are important because reductions in DSH payments will vary by state based on the decline in the uninsured population and other factors. But the government has yet to release details on how the cuts will be distributed in each state.
“We’re still dealing with a lot of uncertainty,” said Bucklew, who estimates Ohio’s DSH reimbursements will be cut by at least $1.5 billion over five years regardless of whether Medicaid is expanded.
Many area hospitals have already begun to make contingency plans.
“Any cuts in reimbursement will certainly impact our health network, (but) the full impact of the reductions won’t be clear until we receive more details,” said Elizabeth Long, a spokeswoman for Kettering Health Network. “Kettering Health Network’s primary focus is to provide excellent care for patients both now and in the future, whatever the regulatory environment. We support Medicaid expansion in Ohio because it would provide people with improved access to the most appropriate level of health care.”
At Community Mercy Health Partners in Springfield, a regional health care system, roughly 12 percent of its patients fall under the category of low income and uncompensated care. And pending cuts in reimbursement for caring for those patients has forced the hospital to rethink operations, said spokesman Dave Lamb
“CMHP has anticipated cuts coming from Columbus and Washington, and we’re taking steps to minimize the impact on the communities we serve,” Lamb said. “We look at consolidation and standardization across departments and units to see how we can reduce costs. We’re embracing change and innovation to further reduce costs, we realize that we need to look at things differently.”
Janet Grant, executive vice president of CareSource, a nonprofit, Medicaid managed care company based in Dayton that serves about 850,000 statewide, said expanding Medicaid would reduce costs for hospitals and consumers not only by cutting down on the demand for uncompensated care but also by providing more preventive care to keep people out of the hospital.
“What’s happening today is people are going to the emergency department when they are really, really sick and needing much more expensive care,” Grant said. “We want to see them shifted to more preventive and cost-effective care.”
The federal government would pay the full cost of a Medicaid expansion for the first three years and at least 90 percent of medical billing in following years.
The cost for expanding Medicaid in Ohio would be about $2.5 billion from 2014 through 2022, according to the Health Policy Institute report. But savings on non-Medicaid spending on the uninsured and revenue from taxes on Medicaid Managed Care organizations, among other sources, would result in a net gain of $1.4 billion over the same period.
Greater Dayton Area Hospital Association leaders urge Medicaid expansion in a guest column on the Ideas & Voices page.