Hospitals worry Medicaid, Obamacare changes could bring pain

With the potential for major changes in federal health care policy looming, hospital leaders are watching closely, worried especially that cuts to Medicaid could bring a big financial hit and that a repeal of Obamacare could raise the number of uninsured Connecticut residents.

“With all of the uncertainty that is coming out of Washington now, we’re obviously very concerned,” said Dr. Rocco Orlando, senior vice president and chief medical officer at Hartford HealthCare, the parent company of Hartford, Backus and Windham hospitals, The Hospital of Central Connecticut, and MidState Medical Center.

In contingency planning, Hartford HealthCare’s worst-case scenario involves Medicaid: the possibility that the federal government will shift from its open-ended funding approach to giving the state a lump-sum of money – and reduce funding by 25 percent.

Hospital leaders also worry that repealing Obamacare – a top agenda item for President-elect Donald J. Trump and Congressional Republicans – could lead to more uninsured residents, which could mean more patients incurring hospital bills they can’t afford or people putting off care until they are very sick.

“I worry that we’re going to go back to growing the number of people who just come in and don’t have any insurance,” said Yale New Haven Health President and CEO Marna Borgstrom, whose hospital system includes Yale-New Haven, Bridgeport, Greenwich and New London’s Lawrence + Memorial hospitals, as well as Westerly Hospital in Rhode Island.

Republican leaders have pledged to come up with a replacement for the health law, but hospital officials say the way any repeal effort occurs, and how the market responds in the interim if the repeal is passed with a delayed implementation, could make a big difference.

The Affordable Care Act cut billions of dollars from Medicare payments to hospitals, and hospital trade organizations have warned that if the health law is dismantled without repealing the cuts, hospitals could end up with more uninsured patients without the funding to help offset the cost of caring for them.

“If the law is repealed and the cuts remain in place, Connecticut hospitals’ fiscal stability and sustainability, as well as patient access to care, will be compromised,” Elizabeth Hamilton, a spokeswoman for the Connecticut Hospital Association, said. She said the association is “deeply concerned” about how patients would be affected if the health law is repealed.

But hospital leaders say they haven’t changed their strategy in one key area – planning for a significant shift in how care is paid for and delivered, from one that largely pays for each test, visit or procedure, to one that ties compensation to patient outcomes. The federal government has pushed this change – which also has been embraced by private insurance companies – but hospital officials say they don’t anticipate that to change with the new administration.

The future of Medicaid

Hospital leaders say Medicaid is the biggest question on their minds when it comes to potential changes in federal policy.

Medicaid currently covers nearly 750,000 state residents, including close to 200,000 who became eligible under Obamacare. The federal government currently reimburses the state for 100 percent of the cost of those added under Obamacare (it will drop to 95 percent as of Jan. 1), compared to 50 percent for those who were previously eligible. This fiscal year, federal funding for Medicaid is expected to bring the state $3.5 billion; the state is expected to spend another $2.4 billion, making it the largest line item in the state budget.

Currently, the federal government reimburses states for a portion of whatever they spend on Medicaid. Under the models advocated by Trump and House Republicans, the federal government would instead give states a set amount of money to spend on the program.  Under one model, block grants, which Trump has advocated, states would get a set total amount to spend on the program. Another model, included in a plan released in June by House Republicans, would give states the option of getting a set amount for each person covered.

What that means for states would depend on how funding levels are calculated, but proponents of such changes cite the need to limit federal spending on Medicaid, and giving states set levels of funding would make it easier for the federal government to control spending growth.

Benjamin Barnes, Gov. Dannel P. Malloy’s budget director, said in a November interview with The Mirror that a major drop in Medicaid funding could lead to cuts for health care providers. “Hospitals think that we’ve been underfunding them for the last few years anyways. I think that would become more acute,” Barnes said.

And Barnes said that if the administration had to cut Medicaid spending, he’d prefer to start with payment rates for health care providers.

While a block grant-type system could leave the state with less money to spend, Borgstrom raised another concern: Since federal funding wouldn’t be directly tied to what states spent on Medicaid coverage, states could have more leeway to direct the federal dollars toward other purposes.

“My concern is that the state’s financial issues are real, but that they, when given block grant money, are not going to be incented to put it in health care. They’re going to use it to stretch to cover other things,” Borgstrom said. “My fear is that over time, that will make all of us less and less viable.”

At Hartford HealthCare, planning for a major cut in funding will involve identifying options and setting priorities, and looking at the potential for unintended harms that could come from cutting specific programs or services, Orlando said.

The health system already has made significant cuts to programs and jobs to adapt to increased state taxes and funding cuts, Orlando said.

“There’s no fat left in our budgets,” he said. “Without more specificity, you really have to consider programmatic closure and that kind of cut if we had a significant reduction in what we’re being paid.”

Asked what would be most at risk, Orlando declined to discuss specifics. “We’re just beginning to get into that process at this point,” he said.

Obamacare uncertainty

The future of Obamacare, including its Medicaid expansion, is a big source of uncertainty.

“I think the big question mark is the [Medicaid] expansion, and what’s going to happen to all the states like Connecticut who were on the forefront of ‘let’s expand Medicaid, let’s get everybody insured, let’s really develop an aggressive exchange,’” Bristol Hospital President and CEO Kurt Barwis said.

Connecticut has embraced Obamacare in the six years since it was passed. The state was the first to expand Medicaid eligibility as part of the health law – it did so in 2010 – and has used several provisions of the law to develop programs that bring the state additional federal funds. Connecticut has its own health insurance exchange, Access Health CT, to sell private insurance. Census figures indicate that the state’s uninsured rate dropped from 9.4 percent in 2013, the year before the major coverage provisions of the law took effect, to 6 percent in 2015.

Orlando expressed concern that repealing the Affordable Care Act could be destabilizing, even if the implementation is delayed. If a repeal led insurance companies that sell plans through the state’s exchange to stop doing so, for example, that could leave thousands of people without insurance options. That’s of particular concern, he added, because many of those who buy coverage through the exchange have medical needs.