Hospitals Take the Lead in Push for Medicaid Expansion

For years, hospitals have complained about low Medicaid payment rates. Now hospital associations are leading the fight to expand Medicaid to millions of low-income adults in two dozen states that have yet to embrace expansion.

Medicaid is no longer a dirty word in hospital boardrooms.

"Right now, someone is sitting in an emergency room because they didn't have coverage," said Steve Ahnen, president of the New Hampshire Hospital Association, last week after NH lawmakers cleared the path to Medicaid expansion in the Granite State by approving a Senate bill that resolved a yearlong political struggle over Medicaid expansion. "The ability to resolve that is to get people covered."

Ahnen says NH hospitals have been feeling the pinch from uncompensated care that totaled $425 million in 2013. "We believe [Medicaid expansion] will have a significant impact on relieving that burden," he said.

Medicaid Expansion, Payer Oversight Seen as Vital to Healthcare Reform

New Hampshire joins several states including Arkansas and Iowa that have chosen to expand Medicaid to income-eligible adults under the age of 65 through the new health insurance exchanges. As opposed to a straightforward expansion of a state's existing Medicaid program, the "premium-based model" allows states to use federal Medicaid expansion dollars to help low-income individuals fund the purchase of health insurance policies on the exchanges.

"We tried to find a way to provide access… and not continue to impose the cost on ratepayers for the uncompensated care," said NH state Sen. Nancy Stiles, (R-Hampton). She says one of the prime benefits to hospitals is that they will receive a higher rate of reimbursement from health policies on the exchange than they would have received through expansion of the state's existing Medicaid program.

Two dozen states have yet to expand Medicaid to income-eligible adults, and hospitals are feeling the pinch, according to Brendan Saloner, PhD, lead author of a perspective piece on Medicaid expansion published in the New England Journal of Medicine on March 27. He says one way the federal government is paying for healthcare reform efforts under the Patient Protection and Affordable Care Act is through cuts to the program Washington had previously used to help hospitals pay for uncompensated care, the Disproportionate Share Hospital reimbursement program.

Cuts to DSH "went into effect under the assumption the states would expand Medicaid," Saloner wrote, adding that hospitals serving low-income populations in states without Medicaid expansion are taking a heavy blow. "That causes a lot of financial strain."

In Missouri, which is politically gridlocked over Medicaid expansion, the state hospital association is leading the charge to expand the program.

"The question is not really whether Medicaid will put hospital revenue in the black, it is more a question of how deep in the red hospitals can go," said David Dillon, VP of media relations at the Missouri Hospital Association. "Without new Medicaid coverage and revenue… hospitals will not only experience the federal cuts but continue to shoulder high uncompensated care costs. In 2012, the most recent year of full data, Missouri's hospitals provided $1.17 billion in uncompensated care."

At the heart of the federal Medicaid expansion push is a guarantee from Washington to pick up the entire tab through 2016. In subsequent years through 2020, the federal reimbursement rate to the states will be tapered to 90 percent.

Pre-expansion Medicaid programs have federal reimbursement rates ranging from 50 percent to 74 percent.

The MHA has established a coalition with business leaders to help break Missouri's Medicaid expansion logjam. "The ACA is the law of the land. In Missouri, the hospital community has teamed up with the Missouri Chamber of Commerce and Industry to move the discussion forward," Dillon said. 

"Businesses understand that without a Medicaid reform and expansion law, they will be exposed to significant cost shifting to support uncompensated care. For Missouri's business community, this has been a kitchen table issue, not a foray into the culture wars."

"Our analysis indicates that with more efficient management of enrollees in the current Medicaid program, the state could actually benefit financially from Medicaid reform," said Dillon. "And, this isn't just in the 100-percent years, but enough through the end of the decade that with proper stewardship Missouri could have nearly $700 million in trust for future state health spending requirements."

NH Deputy Insurance Commissioner Alex Feldvebel says Medicaid expansion should bring relief to hospitals in his state that have felt financial pressure from uncompensated care. "This newly eligible population, because of its low income, will consist primarily of uninsured persons. Providers will be better off when a low income patient has coverage rather than no coverage," he said.

But Robert "Bo" Ryall, president and CEO of the Arkansas Hospital Association, says Medicaid expansion is not a panacea for hospitals struggling to adjust to the pace of healthcare reform efforts and the associated financial changes. "Overall, hospital reimbursement has been severely impacted because of Medicare reductions in the Affordable Care Act and sequestration," he said last week. "Medicaid expansion does help hospitals, but in no way comes close to making up for the Medicare reductions."