Hospitals sound warnings about bypassing Medicaid expansion

2012-08-06T00:15:00Z 2012-08-17T18:35:45Z Hospitals sound warnings about bypassing Medicaid expansionBY ELIZABETH CRISP ecrisp@post-dispatch.com > 573-635-6178 stltoday.com

JEFFERSON CITY • Missouri hospitals say they stand to lose millions of dollars if the state's Republican-led Legislature rejects the option of expanding Medicaid.

The projected loss of up to nearly $400 million would come from cuts to federal Disproportionate Share Hospital (DSH) payments, and at least one doctor has speculated the cuts could force some rural hospitals to close.

The cuts were to be eased by a Medicaid expansion that would add more than 300,000 Missourians to that program, but leaders in the Missouri House and Senate say they are likely to block that move.

"If you don't expand Medicaid and you eliminate the DSH funding, you have the ability to significantly impact hospitals' financials," Missouri Hospital Association spokesman Dave Dillon said. "It's extremely problematic."

At a recent MO HealthNet advisory committee meeting, state Medicaid director Ian McCaslin said the federal law's impact on those payments will give states a reason to "think hard about (Medicaid expansion)."

After the Supreme Court ruled last month that the Medicaid expansion would not be mandatory, Missouri's Republican legislative leaders were quick to say they opposed the expansion because of the impact it could have on the state budget. While the federal government would pay a projected $8.4 billion through 2019 for the expansion in Missouri, the state would have to pay $431 million and an estimated $100 million each year after that to cover the cost of new enrollees.

But state officials likely will face mounting pressure from the powerful hospital lobby in the coming months.

The Congressional Budget Office predicted the battle in a July report. "Pressure to expand Medicaid coverage is also likely to come from health care providers that stand to gain when more people have coverage. In particular, hospitals that will receive smaller disproportionate share payments from Medicaid under the (Affordable Care Act) may exert pressure on states to make up for those losses by expanding Medicaid eligibility," the report states.

The federal government gives the disproportionate share money to hospitals that serve significantly more low-income patients to help cover costs for treating the uninsured, but those payments are to be scaled back significantly under the federal health care law. Under the original plan, many of the patients would be covered under the newly expanded Medicaid program, essentially reducing the need for disproportionate share payments.

The federal health care law calls for more than $22 billion in disproportionate share payment cuts between 2014 and 2022, according to an estimate from the Congressional Budget Office. The cuts will be distributed among the states based on several factors, so the immediate impact to Missouri remains to be seen, but experts have estimated that states could lose half of their annual disproportionate share funding.

Missouri currently is one of the top recipients per capita. Hospitals here are slated to receive $784 million in disproportionate share payments in the 2013 budget, Dillon said.

"We're talking about it being reduced by as much as 50 percent a year," he said. "You're talking about real cuts."

MO HealthNet oversight committee chair Dr. Corinne Walentik said the cuts could have a significant impact on rural hospitals.

Walentik, a professor of pediatrics in the Division of Neonatal-Perinatal Medicine at St. Louis University, said she worries that as many as 40 to 50 percent of rural hospitals could close if those payments cease with no backup.

"It would probably cost the state more to not take (the Medicaid expansion)," she said. She compared the expansion with a stimulus program that will help rural communities save thousands of jobs that would be lost if hospitals are forced to shutter because of the financial constraints.

Dillon was more reserved with his assessment.

"We don't want to be alarmists," he said. "There's a lot of water to pass under the bridge."

But he said that it wouldn't just be rural hospitals. Larger hospitals in St. Louis and Kansas City also could face deep cuts, he said.

Sen. Rob Schaaf, a Republican from St. Joseph who serves on the MO HealthNet oversight committee, predicted that Missouri won't expand Medicaid and that the federal government will change its plans and address the concerns over DSH payments.

The federal government has not set a timeline for states to decide whether they will expand their Medicaid programs, and McCaslin estimated that it could be six to nine months before Missouri has a real sense of direction.

As the Medicaid expansion plan currently stands, the federal government would pay for the first three years for states that opt in. The states eventually would have to pay 10 percent of the costs of the newly covered.

Missouri would receive nearly $19.50 for every dollar it spends on the expanded program between 2014 and 2019, but Republican leaders say the state can't afford to add more people to Medicaid at the expense of cutting education or public safety.

Dillon said that because Medicaid is funded in Missouri partly through provider taxes, the real impact would likely be less.

"You're not talking about a lot of general revenue dollars that are coming from other places," he said. "You're not even talking about the full 10 percent."

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