'A big issue'

The U.S. Supreme Court's decision to uphold most of the healthcare reform law lifted the cloud of uncertainty hanging over many providers, but those that treat large numbers of Medicaid patients struggled to understand the full extent of its impact on them.

The court ruled that the federal government may not threaten to cut off all Medicaid funding for states that do not expand their programs' eligibility to all residents whose income is up to 133% of the federal poverty level. That opens the possibility that some states will not undertake an expansion that was expected to add at least 16 million new enrollees to the shared federal-state insurance program for the poor and seriously ill.

Rep. Phil Gingrey (R-Ga.), co-chairman of the GOP Doctors Caucus, said he expected his state to be among those that refuse to undertake the expansion because of cost concerns.

Public hospital representatives voiced concern that the ruling could stymie the Medicaid expansion that is essential to safety net hospitals.

“We're still studying it; we think it may be a big issue,” said Dr. Bruce Siegel, president and CEO of the National Association of Public Hospitals and Health Systems. “At first read, it seems to give the states the ability not to do the expansion.”

Siegel said states with conservative leadership and a general opposition to the ACA and federal funding are more likely to not expand their Medicaid programs.

Indeed, immediately after the ruling, several GOP governors, including those of Arizona, Florida and Texas, slammed the decision and suggested that they would oppose its implementation.

Before enactment of the law, the cost of Medicaid was split between states and the federal government. The federal government covered an average of 57% of the cost, according to the Center for Medicaid and CHIP Services. The Patient Protection and Affordable Care Act expanded the federal share to the full cost from 2014 to 2016 of new beneficiaries enrolled under the new income-related requirement. After that, the federal share will decline gradually to 90% in 2020 and thereafter.

Hospital advocates and some members of Congress highlighted the double impact on hospitals of the Medicaid component of the court's decision, which could result in both reducing the number of Medicaid-covered patients hospitals treat and retaining disproportionate-share hospital program payment cuts that were instituted to pay for that coverage expansion.

“Their poor population might be much worse off as a consequence of the ruling that was handed down today,” Rep. Michael Burgess (R-Texas) said in an interview. Rep. Fred Upton (R-Mich.), chairman of the House Energy and Commerce Committee, said he plans to hold hearings in the coming weeks to better understand the effects of the Medicaid ruling.

But not all hospitals were concerned about the Medicaid provision of the ruling. For instance, Michael Connelly, president and CEO of Catholic Health Partners, a Cincinnati-based health system, described the Medicaid provision as “creating a nice balance between the rights of the states and the federal government.”

Many Democrats said they were confident states would pursue voluntarily the Medicaid expansion, given the high federal match.

The court “did conclude that no state could lose all of its funds for its current Medicaid program if it chose not to select this option,” Rep. Henry Waxman (D-Calif.), ranking Democrat on the Energy and Commerce Committee, said in a statement. “But the major point is that 100% federal funding remains available to assist states in providing this coverage, and states will seize the opportunity to do so.”

Connelly doubted the contention of the law's supporters that the Medicaid expansion would lessen the extent of emergency department crowding and indigent care that hospitals have struggled with. Even if every state expanded their Medicaid program eligibility, he said, the low physician reimbursement rates most use would keep many of the newly covered from finding care alternatives to hospital emergency departments.

Emergency department visits increased 1.9% annually from 2001 to 2008, according to a June study in the Annals of Emergency Medicine. Reducing the use of costly emergency department care was a leading argument for passage of the law, but recent research has indicated increased use of those facilities after the Massachusetts' healthcare overhaul was implemented.

“I suspect if it is an issue it will be dependent upon local resources—that there will be some communities where it is not a relevant issue and there will be other communities where it is a significant factor,” Dr. Andrew Ziskind, managing director for clinical solutions at Huron Consulting Group, said about continued emergency department crowding.

In the states that opt to expand their Medicaid programs, providers anticipate a number of implementation steps that will impact them to varying degrees in the coming months and years. Key rules will implement the expansion of Medicaid and the modernization of the Medicaid eligibility and enrollment systems.

For instance, providers will be watching as closely as states for expected federal guidance on the benchmark benefits that the law requires Medicaid programs to offer to their new enrollees. The benefits and services it covers are likely to differ from the standard benefits many Medicaid plans have offered their enrollees and those differences could affect the providers who care for them.

Meanwhile, the legal certainty that now exists after the high court's ruling means that states no longer have a reason to hold back on certain provisions—namely the state insurance marketplaces. But they now face a tighter deadline to meet requirements.

In six months, states must show legal authority to proceed with an exchange; hire the personnel to staff the exchange; and develop the information system requirements that will allow exchanges to take in information and distribute it to the public in a way that will allow them to make informed decisions, according to Joel Michaels, a partner at McDermott Will & Emery.

The day after the court decision, HHS announced it would make more funding available to build state-based health insurance exchanges. It said it would provide states with 10 additional opportunities to apply for funding to set up state-based exchanges, state partnership exchanges or to prepare state systems for a federally facilitated exchange. Obama administration officials said they would continue to work with states wherever they are in the exchange process and noted that some are ahead while others are behind. To date, the federal government has distributed $850 million toward exchange building.

For the Medicare program, the decision means continuing implementation of the many provisions that the law established, such as phasing in coverage in the Medicare Part D drug benefit coverage gap, or “doughnut hole”; reducing federal payments to Medicare Advantage plans over time and providing bonus payments to plans that receive high-quality ratings; continuing to reduce annual payment updates to providers (other than physicians); and making adjustments for productivity improvements.

“Medicare spending will grow relatively slower in the next decade than it has in previous years because the law includes significant savings to the program,” Tricia Neuman, senior vice president and director of the Kaiser Family Foundation's program on Medicare policy, told Modern Healthcare. “This had the effect of sustaining the life of the trust fund.”

The $155 billion in reduced payments over 10 years that hospitals accepted under the law from Medicare and Medicaid includes $36 billion from disproportionate-share hospital payments—special funds hospitals are given to treat a higher-than-average number of indigent patients—and $112 billion from yearly reductions to the hospital. Those reductions to Medicare and Medicaid payments are expected to be offset over the long term by sharp increases in the share of patients having insurance, as provided by the new health reforms.