Will Congress Rescue Hospitals From Medicaid Pay Cut?

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By Victoria Pelham

Lawmakers may be starting to buy into safety-net hospitals’ calls to ward off deep cuts to Medicaid payments before they start taking effect next month.

The cuts affect payments meant to offset charity care costs for providers serving disproportionately high numbers of the poor and uninsured. But under a proposed Centers for Medicare & Medicaid Services rule implementing a long-delayed Obamacare provision, those providers in fiscal 2018 would see $2 billion slashed from the nearly $12 billion in federal annual allotments. Those cuts would grow to reach a total of $43 billion through 2025.

Nearly 90 chief executives representing more than 234 hospitals Sept. 12 called on leaders of the Senate Finance and House Energy and Commerce committees to “collaborate and work swiftly” to delay the cuts, by a minimum of two years. They warned in a letter signed by Bruce Siegel, president and CEO of America’s Essential Hospitals, that the disproportionate share hospital (DSH) cuts would hurt the health-care safety net, damaging care access and local economies.

Shawn Gremminger, director of legislative affairs for America’s Essential Hospitals, told Bloomberg BNA providers hope to be able to add the delay into a bill to reauthorize the Children’s Health Insurance Program. CHIP funding needs urgent action too, as it’s set to expire Sept. 30. The hospitals are up against some challenges: lawmakers’ ire coming out of the stalled Obamacare repeal-and-replace conversations and a very crowded congressional calendar. Still, the hospitals plan to keep ramping up the pressure on Congress.

And some lawmakers are starting to listen.

A separate letter from Reps. Eliot Engel (D-N.Y.), John Culberson (R-Texas) and Steven Palazzo (R-Miss.) urged lawmakers to act quickly to delay the cuts to “critical” DSH payments by at least two years. Their “dear colleague” letter aims to round up congressional support by Sept. 20.

Gremminger called that push a chance to get a “real indication of whether we have broad bipartisan support on stopping DSH cuts.”

‘Slow-Moving Catastrophe’

If the CMS proposed rule is made final, the initial $2 billion cuts go into effect for fiscal 2018, starting Oct. 1.

Because states receive the funds on a quarterly basis, the end of the first quarter sets a ticking clock, with some states like Missouri already beginning to reduce their state DSH payments to hospitals in anticipation of the cuts.

The agency will weigh the allotments based half on a state’s uninsured rate and 25 percent each on charity care and Medicaid volume. Based on those factors, federal payments would likely fall by a range of 1.2 percent to 33.5 percent in the next fiscal year, according to projections from the Medicaid and CHIP Payment and Access Commission, with the largest impacts felt in Connecticut, Tennessee, and Washington.

Each state would determine how those dollars are doled out among providers and hospitals.

“There’s no question; these are not the kinds of cuts that can be swallowed and you move on,” Gremminger said.

If the push isn’t successful, hospitals will have to scale back services, he said.

Essential hospitals offer care to the low-income, the uninsured, Medicaid beneficiaries, and often those with life-threatening health issues. If they struggle, it would have repercussions for the entire safety-net care system, Gremminger said.

“We’re looking at the beginning of a slow-moving catastrophe as cuts get larger and larger and become more and more untenable,” he said.

By the end allotments would be scaled back by almost two-thirds.

Providers warned Sept. 12 the DSH cuts would ultimately place vulnerable patients at risk.

They also pointed to continually high amounts of uncompensated care, making the reductions “unjustifiable,” and to the impact the cuts would have on local jobs.

The ACA’s reductions in the payments were made under the assumption more people would be insured through health insurance exchanges and Medicaid expansions. But they were added before a Supreme Court ruling left states able to opt out of the expansion.

“Our nation’s hospitals cannot sustain losses of this magnitude,” Engel, Culberson, and Palazzo wrote. “Institutions will be forced to shutter, leaving our constituents without a safety net.”

The executives on the letter represent health systems from across the U.S. and in varied circumstances: urban, rural, in states that expanded Medicaid and those that chose not to, in liberal and conservative areas. Safety-net hospitals hope that will bring the issue more into focus for lawmakers.

The lawmakers haven’t heard enough yet from those on the ground about the issue, Gremminger said.

Busy Calendar

Members of Congress will need to place pressure, in turn, on committee chairmen and ranking members and leaders in both chambers to get a deal through, he said.

Safety-net hospitals would like to see the issue addressed as part of a safety-net package of extenders, also including federally qualified health centers.

But DSH cuts “just have not risen to the level yet of things they feel they absolutely have to do,” Gremminger said.

And Congress faces a busy schedule.

Senate Finance Committee lawmakers announced Sept. 12 they had reached a deal on a five-year extension of CHIP. That deal did not appear to include Medicaid DSH cuts, but the bill’s text hasn’t been released yet.

Senate Majority Whip John Cornyn (R-Texas) said Sept. 13 there isn’t a timeline yet for passing CHIP.

“There’s just so much to be done getting them done in a timely manner would be difficult,” Gremminger said. “It would be wise to try to package as many of these noncontroversial bipartisan priorities together as possible.”

—With assistance from Alex Ruoff.

To contact the reporter on this story: Victoria Pelham in Washington at vpelham@bna.com

To contact the editor responsible for this story: Brian Broderick at bbroderick@bna.com

For More Information

The full hospital executive letter is at http://src.bna.com/st4.

The lawmakers' "Dear Colleague" letter is at http://src.bna.com/st5.

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

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