Despite governors' protests last week, cuts to Medicaid are likely to happen and hospitals had better be prepared for the consequences.
Governors in Washington for the annual National Governors Association's winter gathering met with the administration and members of Congress to express their unhappiness over President Bush's proposed $60 billion cut to Medicaid over the next 10 years. But despite the concerted effort to get some concessions from the president, in the end all the governors got was a promise to work with them. Meanwhile, indications are that at least parts of Bush's plan to cut Medicaid will pass Congress.
"I think some cuts are inevitable," said Nancy Schlichting, president and chief executive officer of the Henry Ford Health System, a four-hospital system based in Detroit.
Half of Michigan's Medicaid recipients live in the Detroit area and cuts would devastate hospitals there, she said. Because Medicaid payments make up roughly 15% to 20% of Henry Ford's revenue, cuts would severely compromise its finances. The system is always looking for ways to become more efficient, "but when (cuts) come in a big wave, it is very hard to recover from that," Schlichting said.
Last month President Bush unveiled his plan to cut Medicaid in his 2006 budget proposal, setting off a wave of criticism that his plan would force cash-strapped states to cut benefits and drop Medicaid beneficiaries, which in turn would swell the number of uninsured Americans. Included in Bush's proposal are efforts to rein in what the administration calls inappropriate methods used by states to get more funding from the federal government.
Shortly after Bush's proposal was unveiled, the American Hospital Association and 20 other healthcare provider associations sent a letter to Congress saying the White House proposal to cut Medicaid "may adversely impact the ability of healthcare providers to meet the healthcare needs of millions of Americans."
Meanwhile a new estimate from the Congressional Budget Office last week cast some questions on the Medicaid savings to be achieved under Bush's proposal. According to the CBO estimates, Medicaid savings for the first five years of the president's cuts would be $8.5 billion, down from an earlier estimate of $13 billion.
Schlichting was not the only hospital CEO who sounded pessimistic last week about the likelihood of staving off Medicaid cuts.
If they do occur, at the very least hospitals would see a jump in their uncompensated-care costs as a result of a rise in the number of uninsured, said Michael Dowling, president and CEO of 10-hospital North Shore-Long Island Jewish Health System, Great Neck, N.Y.
"That's an obligation that would obviously increase," he said.
After the conclusion of last week's governors meeting, a coalition of long-term-care providers and representatives, including the American Health Care Association and the AARP, sent a letter to the House and Senate Budget committees urging them to reject cuts and caps placed on Medicaid.
Congress is still considering the president's proposal and next week will begin writing its own budget blueprint, which will then have to be reconciled with the president's version.
"We will likely include Medicaid savings, and Congress should work to pass it as soon as possible," said Gayle Osterberg, a spokeswoman for the Senate Budget Committee. The Finance Committee has jurisdiction over the Medicaid program.
In the House, Rep. Joe Barton (R-Texas), chairman of the Energy and Commerce Committee, has said he is open to cutting Medicaid funding. His committee has jurisdiction over Medicaid.
In addition to trying to fend off cuts, governors sought greater flexibility to rejigger their Medicaid programs without having to first get an HHS waiver.
In his meeting with governors, Sen. Jay Rockefeller (D-W.Va.) warned them to move with caution. "We have an opportunity to improve the program, but we must also be careful about not doing great harm," he said. "We must band together in opposition to Medicaid cuts and spending caps."
Rockefeller's comment on spending caps was a reference to a 2003 attempt by the Bush administration to push for a "block grant" approach to Medicaid. Under pressure from governors, Democrats and consumer advocates, the administration abandoned that proposal. Last week, however, Gov. Mark Warner (D-Va.), chairman of the National Governors Association, suggested the administration has not completely closed the door on caps. Asked whether the White House had promised there would be no caps, he said, "That's something we're talking about."
Up next for the governors is an effort to forge an agreement on an alternate Medicaid proposal to present to lawmakers and the White House. The process could take months, some governors cautioned. "There's still a lot of work to do," Tennessee Gov. Phil Bredesen, a Democrat, told reporters. [[[[