Reform Update: Delay Medicaid DSH cuts, hospitals ask lawmakers

Hundreds of hospitals around the country have signed a letter to congressional leaders (PDF) asking them to delay cuts to Medicaid supplemental funding for the care of the uninsured and low-income patients.

More than $18 billion in cuts for the Medicaid disproportionate share hospital funding are expected to take effect between 2014 and 2019. Those cuts were mandated by the Patient Protection and Affordable Care Act, which was passed with the expectation hospitals would deliver less uncompensated care because all states would expand Medicaid eligibility to adults earning up to 138% of the federal poverty level. But the U.S. Supreme Court last year made Medicaid expansion optional for the states, and about half the states have not expanded their programs.

In addition, there has been unexpectedly slow enrollment of uninsured Americans through the malfunctioning HealthCare.gov exchange website. With the DSH cuts starting, “it's a triple witching hour,” said Dr. Bruce Siegel, CEO of America's Essential Hospitals, a trade group for public and safety net hospitals.

The hospitals expected to be hit hardest by the cuts are those in states that are not expanding their Medicaid programs. America's Essential Hospitals says some hospitals serving rural areas already are shuttering their doors. If the cuts continue as planned, other hospitals likely will turn to layoffs and reducing services to offset financial losses, Siegel said.

The hospitals that signed the letter are asking for a freeze on the Medicaid DSH cuts for three years. This change would give stakeholders a better picture of the extent of Medicaid coverage expansion, since it's expected that at least some of the states that so far have not expanded their program will do so over the next several years, the hospitals say.

For instance, state hospital associations in non-expanding states such as Florida are pushing their lawmakers to “take the federal money and get people covered,” said Bruce Rueben, president of the Florida Hospital Association.

Hospital and state officials previously have warned congressional leaders about the likely impact of the DSH cuts. But they say in recent months federal lawmakers seem to take the issue more seriously as reports have emerged about the dire financial circumstances of some hospitals.

As a result of the news coverage, “you're seeing more people paying attention to what's going on because they are starting to see the real pain being caused in their communities,” said Kevin Boyle, a spokesman for the Georgia Hospital Association.

Still, it's an open question whether the White House and Senate Democrats would dare re-open any provisions of the healthcare reform law, because Republicans likely would try to use the opportunity to push through more sweeping changes.

None of the House and Senate leaders addressed in the letter have publicly commented on the hospitals' letter.

Sen. Roger Wicker (R-Miss.) and Rep. John Lewis (D-Ga.) have introduced bills to delay Medicaid DSH cuts for two years.

Several state Medicaid agencies say they will not take up the workaround option the CMS suggested to make sure Medicaid-eligible applicants in the 36 states served by the federal insurance exchange get Medicaid coverage effective Jan. 1.

Healthcare.gov is still unable to transmit completed Medicaid applications to state agencies. As a stopgap measure, the CMS has been sending weekly data transmissions to state Medicaid officials with limited information about individuals who have been tentatively deemed eligible for the program. The federal agency has been sending these transmissions since October.

These communications, known as “flat files,” were never meant to be used to enroll anyone, according to the CMS. Rather, they were meant to prepare agencies for the work of sorting through new enrollees.

Late last Friday, the CMS sent a letter to state officials saying it would allow the 36 states that are relying on the federal marketplace to either assess or determine Medicaid eligibility to apply for a waiver allowing them to use these files to enroll people in the program.

Several states have indicated they will likely not take up the CMS on the offer because it's too much of an administrative burden. There also are concerns that some people who are not eligible will be enrolled, and that there could be duplicate enrollments that could result in fraud.

“This proposed process requires (our department) to manually input the files, creating a process that is administratively inefficient and increases the risk for duplication of members in the state's system,” said Pamela Keene, a spokeswoman for the Georgia Department of Community Health. “Any duplicate files will have to be eliminated once the electronic account transfers begin.”

There is also the concern that the interim process may prevent Medicaid beneficiaries from receiving timely notifications regarding their eligibility and enrollment, Keene added.

Officials in Indiana expressed similar concerns and indicated that the state is “comfortable waiting until more complete applications are transferred to us from the federal government since we would ultimately be able to make coverage available to the applicants retroactively if they are determined eligible,” said Jim Gavin, director of communications at the Indiana Family and Social Services Administration.

Louisiana officials also said they would rather wait and “keep our resources focused on building our electronic account transfer capacity, which is nearing completion,” said Christina Stephens, communications director for the Louisiana Department of Health and Hospitals.

More than 1.46 million Americans were determined to been eligible to enroll in Medicaid or the Children's Health Insurance Program in October through state Medicaid and CHIP agencies and through the new public insurance exchanges, the CMS said Tuesday.

The number of applications submitted and Medicaid determinations made “is encouraging,” the agency said.

The findings were outlined in a report indicating a 15% jump in applications compared to the average monthly enrollment in July through September for the states expanding their programs under the Patient Protection and Affordable Care Act.

Follow Virgil Dickson on Twitter: @MHvdickson