Industry News, Industry News, News, Patient Care

Hospitals Battle Bid to Rein in Medicaid

RALEIGH, N.C. — As the last months of the Bush administration dwindle away, the White House might yet face another showdown with the Democratic Congress, this one over changes in Medicaid rules that could affect millions of low-income children and adults.

In the past year, the administration has tried to change the rules in a way that would reduce Medicaid spending by $15 billion over the next five years. The federal-state program pays for health care for the nation’s poorest citizens.

The rule changes have brought objections from health-care leaders across the country. But the Bush administration say the changes represent tighter controls on Medicaid’s rising costs.

Some rule changes, which would be enacted around Memorial Day, would reduce payments to North Carolina by an estimated $320 million next year alone. Hospital leaders and local government officials across the country say that if Congress doesn’t block the regulations, patients will lose, particularly the uninsured, who may be turned away.

The state hospital association says workers will be hurt, too. It estimates 3,000 to 6,000 hospital jobs could be lost, up to a thousand of those in rural areas.

Hospital leaders have enlisted among their champions Sen. Elizabeth Dole, a Republican running for re-election. Though one of Bush’s closest allies in the Senate, Dole is challenging the White House over its plans for Medicaid.

“This was a hastily made change,” she said.

The Bush administration says that the changes aren’t at all hasty and that they come as part of a needed examination of a program suffering from what federal Medicaid chief Dennis Smith called “mission creep.” The phrase refers to the expansion of Medicaid coverage to populations and services that the administration thinks a program for poor people should not cover.

“What really is the role of Medicaid? Raising these areas of concern is something everyone should be aware of,” said Smith, director of the federal Center for Medicaid and Medicare Services. He pointed to past Government Accountability Office reports showing waste or shoddy oversight in various programs.

Examples of waste can be found in many states. In North Carolina, state officials realized in 2003 they had overpaid hospitals by hundreds of millions of dollars through the same payment program now being tackled by Smith’s proposed rule changes.

Still, around the country, hospital administrators are meeting in boardrooms, calling on lawmakers and worrying about how to handle expected cuts from the latest rules. In Congress, members are holding hearings about the changes’ impacts. Dole has been lobbying peers on the Senate floor.

Rural red ink foreseen

In North Carolina, half of the state’s rural hospitals could find themselves running a deficit because of the Medicaid program.

“When you’re trying to stretch, it’s just crazy,” said Laura Easton, chief executive officer of Caldwell Memorial Hospital in Lenoir. “It hurts bad.”

Easton said her hospital would lose $1 million next year more than her $800,000 net operating income. These days, she walks the hallways of her hospital in the foothills of the Blue Ridge Mountains and wonders: Will she have to cut jobs when her emergency room is already full of flu patients? Will she have to trim obstetrical services when 70 percent of her new babies arrive on Medicaid?

“It’s something I’m struggling with,” Easton said. “On every delivery, I lose $744. That’s before the million-dollar cut. I did 485 of those last year.”

Some rural hospitals could close, said Thomas Galligan, deputy director for budget and finance within the state’s Division of Medical Assistance.

The rule many hospitals fear most would change the definition of a “public” hospital and all but eliminate reimbursements to the state for many uninsured patients.

North Carolina has drawn money from the federal government by using matching funds from about 40 of its public hospitals, including many county hospitals, that treat uninsured patients.

The Bush administration has occasionally proposed Medicaid changes as part of the president’s annual budget request, but Congress declined to enact his ideas.

Clash with Congress

Now, with less than a year left in his presidency, Bush doesn’t have the Democratic-controlled Congress on his side. But he has the power to change regulations. Many of the new rules came in the past year.

“This is the administration disregarding the will of Congress,” said Lynne Fagnani, senior vice president for the National Association of Public Hospitals and Health Systems.

Fagnani said hospitals have warned her of closed clinics, longer emergency room waits, fewer hospital beds results that touch all patients, not just those on Medicaid.

“These could affect things that everyone cares about,” Fagnani said.

But, to Smith, it’s a matter of keeping Medicaid focused on its mission.

“To slip these [programs] under the door of Medicaid, I think, undermines its accountability,” Smith said.

Some observers say the rules come as part of necessary changes to a bloated entitlement program that finds itself paying for services unrelated to Medicaid’s purpose.

“It’s important to start to bring about more accountability. These are just small steps,” said Nina Owcharenko, a senior policy analyst at the Heritage Foundation and a former Jesse Helms staffer.

“Congress should really let these regulations go through,” Owcharenko said. “By doing another moratorium, Congress is saying we’re going to keep the mess because we don’t have the fortitude to address the underlying problems.”

Last year Congress imposed a moratorium on two of the rules including the one that many hospitals in North Carolina worry about most.

But the congressional stopgap expires May 25.

Sen. Dole steps in

Dole signed on as the lead Republican co-sponsor of legislation from Sen. Jeff Bingaman, a New Mexico Democrat. The bill would extend the moratorium one more year beyond Bush’s tenure as president. It has the support of the majority of the Senate and more than 200 members of the House.

Still, supporters of the legislation say Bush would veto any free-standing bill.

So Bingaman must instead tack his moratorium onto “must-sign” legislation such as the supplemental war-spending bill. Because Congress passes few major bills in the spring, only a handful are bound for the president’s desk in the coming months.

“The sense of urgency is that both the Senate and Congress need to act now,” said John Bluford, chief executive officer of Truman Medical Centers in Kansas City, Mo., and chairman-elect of the National Association of Public Hospitals.

If the rules go through, he said, his hospital could lose $37 million. He fears he might have to restrict health care for indigent patients to only the poorest.

“They’re very hurtful to us,” Bluford said of the rule changes.

Politics aside, hospital administrators and county health officials nationwide are worried.

Lauren Reichelt, health and human services director for Rio Arriba County in northern New Mexico, said she has spent 15 years working with villages in the rugged agricultural region, where women sometimes delivered babies with only their husbands as attendants.

“I feel like we’ve reversed that and gotten ambulance coverage to most parts in our county,” she said. “I’m terrified, actually, that these rules changes would reverse that progress.”

State looking at losses

Duke University Medical Systems would lose a quarter of its net operating income, said Ken Morris, senior vice president and chief financial officer. The hospital system may have to increase costs to insured patients or look to cuts in areas such as pediatric care that don’t pay for themselves.

WakeMed lobbyist Judy O’Neal said the rule changes, which could cut $17 million from the hospital, have become her top priority.

“I just see our emergency department … and you say, ‘My gosh, we’ve got enormous demands,’ ” O’Neal said.

In Charlotte, Carolinas Health Care System the state’s largest Medicaid provider warns that it would lose $62 million.

“It’s the state’s most vulnerable citizens,” said Russ Guerin, the system’s executive vice president for business and planning. “I really believe that it is our legislators’ responsibility to continue to protect these folks.”


Medicaid is a federal-state partnership to pay for health care for low-income residents. About 50 million adults and children now receive Medicaid services.

WHAT’S GOING ON? The Centers for Medicare and Medicaid Services has several new rules that cut into various programs used by states. It hopes to save $15 billion over five years. Many hospitals and advocacy groups don’t like the changes.

WHAT DOES THE GOVERNMENT WANT TO CHANGE? Several things. Through a series of regulations, the federal government would:

  • Cut funding for the education of medical residents, who often work in teaching hospitals that serve low-income patients.
  • Narrow the definition of a public hospital.
  • Restrict some reimbursements to “cost only,” which doesn’t take into account equipment and overhead costs.
  • Clarify the reimbursements on some outpatient services.
  • Cut payments for transportation and administrative costs for health services at schools.
  • Clarify the meaning of rehabilitative services.

WHAT’S AT STAKE? The Bush administration says it wants to restore the integrity and accountability of a Medicaid program that has become an umbrella for too many programs.

Hospitals and advocacy groups worry the cuts will hurt health care for low-income patients because of cuts to jobs and programs.

WHAT’S BEING DONE? A lot of lobbying. A bipartisan bill in Congress would put off two of the rule changes until May 2009. North Carolina hospitals fear a $320 million cut if the rules go into place. Sen. Elizabeth Dole and Rep. Sue Myrick have been leaders on the Republican side in the effort to get the bill passed.