Hospitals Gear Up for Potential Medicaid Hits From GOP Bill

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By Mike Stankiewicz

Some hospitals might be forced to reduce services or shut down due to steep Medicaid cuts if Senate Republicans’ proposal to replace much of Obamacare becomes law.

“For the hospitals that protect millions of Americans and their communities, our essential hospitals, this bill might even accelerate decisions by some to reduce services or close their doors,” Bruce Siegel, president and chief executive officer at America’s Essential Hospitals, said June 22 in a statement. “We oppose this plan and appeal to senators to consider the needs of all Americans.” AEH is an industry group that represents about 300 safety-net hospitals.

The Better Care Reconciliation Act of 2017, unveiled June 22 by Republican senators, would phase out the Affordable Care Act’s Medicaid expansion over three years starting in 2021 and would make deep cuts to Medicaid starting in 2020, possibly forcing states to reduce eligibility and benefits in order to offset losses. The draft bill follows the House’s approval in May of its version of the Obamacare repeal and replacement.

The Senate may vote on the bill by the end of June. On the day it was unveiled, the Senate draft was condemned by hospital groups, including the American Hospital Association and the Federation of American Hospitals, which said the proposal would hurt health-care providers and patients.

Rick Pollack, president and CEO of the American Hospital Association, said the Senate needs to go back to the drawing board.

“The draft bill under discussion in the Senate moves us in the opposite direction, particularly for our most vulnerable patients,” he said in a June 22 statement.

“The Senate proposal would likely trigger deep cuts to the Medicaid program that covers millions of Americans with chronic conditions such as cancer, along with the elderly and individuals with disabilities who need long-term services and support,” Pollack said. “Medicaid cuts of this magnitude are unsustainable and will increase costs to individuals with private insurance.”

Changes to Medicaid

The Senate bill would make drastic changes to how Medicaid payments are provided to states. According to the Senate Budget Committee, the bill provides flexibility for governors by allowing them to choose between a block grant or a per-capita funding approach for their Medicaid population in 2020, “with a flexibility in the calculation of the base year.”

Michael Abrams, co-founder and managing partner at Numerof & Associates, a health-care consulting firm based in St. Louis, said the Medicaid cuts come from the need to free up revenue for other things, like defense and tax cuts, but that they do nothing to reduce health-care costs.

“What strikes me is what’s not here,” he told Bloomberg BNA June 22. “It doesn’t address why health-care is as expensive as it is. This does not solve the real problem.”

Abrams also said the caps would put a heavy burden on hospitals, as medical inflation continues to rise.

“Medical inflation has been running much higher than general inflation, so capping the growth of reimbursement is going to be a wrenching change,” Abrams said. “This will put a lot of pressure on hospitals to find ways to lower costs.”

The Senate bill would also phase out federal funding for those states that expanded Medicaid coverage under Obamacare over three years starting in 2021. The expansion of Medicaid coverage, which was optional for states, has provided coverage in 31 states for at least 11 million people whose income is up to 138 percent of the federal poverty level. Under the bill, those people would no longer be covered by 2024.

“This is going to cause a lot more people to depend on charity care, and hospitals will need to find a way to offset that,” Abrams said. “They might increase the costs of their services for people who can afford it, or they’ll need to find cuts elsewhere.”

Bracing for Impact

“Whatever happens, we are not turning away patients,” Atul Grover, executive vice president at the Association of American Medical Colleges, told Bloomberg BNA June 22.

Many hospitals, especially those in small towns and low-income areas, depend heavily on Medicaid funding and have high amounts of uninsured and underinsured patients. In order to offset cuts to Medicaid, many hospitals might be forced to make cuts to their services, raise their prices, or possibly shut down.

“The challenge is almost 75 million people depend on Medicaid for coverage so any cuts to the program are bad for the American people,” Grover said. Low-income and rural hospitals will be hardest hit by this “as many of them are barely making it by.”

Chip Kahn, president and CEO of the Federation of American Hospitals, which represents investor-owned hospitals, said in a June 22 statement that the Senate needs to “make critical revisions to keep the promise of accessible, affordable health care coverage and ensure Medicaid remains a viable program because it is essential to our most vulnerable neighbors.”

He also said any health-care reform should “maintain coverage levels, have reasonable Medicaid structural reforms, sustain affordable, high quality individual coverage, protect employer-sponsored insurance and roll back untenable cuts to hospital reimbursement.”

Elizabeth Carpenter, a senior vice president at health-care consulting firm Avalere Health, told Bloomberg BNA June 22 that consumers would be likely to see higher out-of-pocket costs for care in order for hospitals to offset bad debt from customers who could not pay.

“Hospitals are going to see more insured patients with less generous coverage, and that will be be challenging to the hospital business model,” she said. This would put pressure on hospitals to make tough choices, she added.

To contact the reporter on this story: Mike Stankiewicz in Washington at mstankiewicz@bna.com

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

For More Information

The draft bill is at http://src.bna.com/p65.

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

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