Theres an old joke about two elderly women who complain about the food at a restaurant. The food at this place is terrible, one of the ladies says. I know, agrees the other, and such small portions, too.
In short, the complaints are generally the same for Medicaid reimbursement. Healthcare administrators say the program pays too slowly, is too reliant on the whims of state and federal budgets, and doesnt allow for a predictable, stable income.
The problem is that hospitals in generaland teaching hospitals specificallyhave become dependent on Medicaid dollars primarily because of the number of poor and indigent patients that they take in. This is especially true for hospitals located in larger, more urban areas. And this is despite data released last October by the Kaiser Commission on Medicaid and the Uninsured that show a slowing enrollment in the program through fiscal 2007, reflecting a period when the economy was more robust. (See chart). Still, the commission predicts that more people will enroll over the next reporting period, and hospital administrators and state Medicaid directors are watching sagging economic figures as a potential enrollment driver.
On average, the federal-state hybrid program pays about 80 cents on the dollar, meaning that hospitals lose money for every Medicaid patient they treat. Individual physicians and smaller practices are also at the whim of Medicaid, but its the hospital sector that faces the brunt of the payment problem.
For the most part, the split between the federal share of dollars, called the federal medical assistance percentages, or FMAP, and the state dollars is close to even. Overall, the federal government will pay for about 57% of medical assistance, according to the CMS. Other studies show that the states continue to boost their share of the payments. The Kaiser Commission says that tracking back to last year, all states and the District of Columbia increased provider paymentsand plan to do so in the future.
Even so, hospital executives expect little consolation from the provider pay raise, and many of them are eyeing a potential spike in the Medicaid ranks because of the flagging economy. In total, the Medicaid program is underfunded, says David Morlock, senior associate director and chief financial officer at the 807-bed University of Michigan Hospitals and Health Centers in Ann Arbor. In other words, we lose money.
To make up for some of those losses, hospitals take advantage of supplemental payments, which are revenue streams often hashed out at the state level, then later matched with federal funding. According to a May report by the Government Accountability Office, states netted at least $23 billion in supplemental payments in fiscal 2006, with the federal share totaling more than $13 billion.
Even with the supplemental payments, its difficult to judge what impact the overall dollars have on individual hospitals because each state has its own Medicaid plan, says Robert Dickler, chief healthcare officer at the Association of American Medical Colleges and a former hospital administrator. Its a very mixed world out there, he says.
Dickler says that hospital administrators typically look at the reimbursement situation in the aggregate, so when cuts are proposed to graduate medical education, for instance, they see that as a percentage reduction overall. Whenever a supplemental becomes the focus of debate, that sends chills up everyones back, he says.