States draw battle lines

Hospitals are geared up for a state-by-state battle for the Medicaid coverage promised by the healthcare reform law, and to get Congress to compensate them if the promise is broken.

The U.S. Supreme Court's landmark decision upholding much of the Patient Protection and Affordable Care Act also struck down the law's financial penalty for states that do not expand their Medicaid program to all individuals with incomes up to 138% of the federal poverty level. That decision turned attention to the governors of the 26 states that sued to overturn the law and where many provider and patient advocates have begun assembling a push for Medicaid expansion.

Republican officials in several of those states are digging in their heels.

“But even though the federal government has promised to initially pay 100% of the increase in Medicaid payments for the first three years of Obamacare, the burden increasingly shifts to Florida taxpayers in future years,” Florida Gov. Rick Scott said in a statement. Under the law, the federal government provides 100% funding for the newly eligible Medicaid beneficiaries in 2014 through 2016 and then the federal share tapers down to 90% by 2020 and thereafter.

Scott was one of 15 Republican governors to issue a statement in the immediate aftermath of the healthcare ruling voicing continued opposition to implementing the law. He was the first of five of the nation's 29 Republican governors—in Florida, Louisiana, South Carolina, Iowa and Mississippi—who by Independence Day specifically said they would refuse the Medicaid expansion.

The toughening resistance to a central pillar of the healthcare overhaul—the Medicaid expansion was expected to provide coverage to at least half of the 32 million people expected to gain coverage under the law—heralds a grueling state-by-state fight over expanding the program.

Amid these fissures in the near-universal coverage envisioned under the law, some hospitals are feeling jitters about the impact of an influx of patients newly covered by Medicaid and where state and federal officials will find the money to pay for it.

Dr. Sheldon Retchin, CEO of Virginia Commonwealth University Health System, Richmond, said that although he personally supports the expansion, it could exacerbate emergency department crowding because of the inability of office-based physicians to treat more Medicaid enrollees.

At Miami's Jackson Health System, the third-largest safety net hospital system in the nation, leaders are not sure they want the Medicaid expansion if it means diverting cash reserved for indigent care; the state has a $350 million fund largely devoted to indigent care that is funded by federal and local sources. “There's a limited pool of funds available for Medicaid expansion; would those funds be redirected from Jackson to fund the Medicaid expansion program or not?” said Brian Dean, vice president of finance at Jackson.

And as advocates for providers and the uninsured laid plans for state-level political campaigns, some also saw alternative paths that would circumvent state politics.

For example, some raised the possibility that HHS could strong-arm states to undertake the expansion if they have Medicaid waivers awaiting approval. The waivers are a top priority in several states seeking permission to make changes to their programs to control costs.

Bruce Rueben, president of the Florida Hospital Association, said that state's pending application to move its Medicaid population into managed-care plans could provide the catalyst to such an expansion, although the expansion of Medicaid in the state is far from assured. “That process, alone, gives the state and the federal government reason to negotiate and reason for back and forth,” Rueben said.

The arguments of hospitals in the state could have a familiar ring to the governor, the former CEO of what is now called HCA, a for-profit hospital chain with 39 hospitals in Florida. Scott, however, has repeatedly frustrated Florida hospitals since taking office in 2011 with budgets that cut Medicaid payments to providers by about $800 million and proposing much deeper cuts accomplished by changing the way hospitals are paid.

Similarly, Wisconsin has an outstanding waiver pending at HHS to approve a new Medicaid benchmark plan outlining enrollees' benefits and cost-sharing. Health plan expansion advocates in that state urged the Obama administration to trade approval of that application for a state commitment to expand enrollment in the Medicaid program, known as BadgerCare Plus, just as HHS previously denied the efforts of Republican Gov. Scott Walker to restrict it.

Meanwhile, advocates for hospitals that care for the biggest numbers of low income patients said they were preparing to lobby Congress to roll back some of the $18 billion cuts in Medicaid disproportionate-share payments that were written into the law with the assumption that they'd be offset by a lower burden of caring for the uninsured. “We will be talking to folks on Capitol Hill about the way that the numbers baked into the law make the expansions uncertain but the cuts certain,” Beth Feldpush, vice president for policy and advocacy at the National Association of Public Hospitals and Health Systems.

Some observers expect resistance among state-level Republicans to soften after the November elections—assuming President Barack Obama wins re-election—but states that wait until November or early next year to plan for expanded Medicaid coverage are likely to miss the scheduled January 2014 start date of the Medicaid expansion. “A state that waits until after the election, in my opinion has virtually no chance” of starting the expansion on time, said Paul Hencoski, national lead partner for KPMG's Healthcare Reform Task Force.

John Hawkins, a lobbyist for the Texas Hospital Association, said his group's 500 member hospitals and their 300,000 employees will bring “significant” political pressure on state political leaders to approve the expansion. Texas Republican Gov. Rick Perry has shown little enthusiasm for doing so and issued a statement after the Supreme Court ruling urging Congress to replace the reform law.

Similarly, Pete Wertheim, a spokesman for the Arizona Hospital and Healthcare Association, said hospitals in that state are still trying to confirm the position of its political leaders. “I could even see a scenario where states would scale back Medicaid, as opposed to expanding it,” Wertheim said.

TAKEAWAY: Hospitals are anxious as governors jump on an opening from the Supreme Court to reject the law's Medicaid provisions.