Expanding Medicaid Could Backfire On the Hospitals
TALLAHASSEE – The Florida Hospital Association wants the state to expand Medicaid, as contemplated by the Patient Protection and Affordable Care Act (PPACA). In testimony last week before the Senate Select Committee on the PPACA, the FHA complained that its member hospitals lose millions of dollars a year providing “uncompensated care” to patients who lack insurance.
The most expensive form of uncompensated care is known as “episodes of care,” which occur when people who lack health insurance seek care in hospital emergency rooms. The FHA notes that some of the cost of providing this care is recouped through “silent taxes” on the insured but that the rest is considered “charity care” by the hospital.
During the Senate panel’s deliberations, which included testimony from representatives of private, non-profit, and public hospitals, several of the lawmakers seemed to agree that the hospitals would see some relief from the costs of uncompensated care if more Floridians were covered by Medicaid. They came to this conclusion based on projections, including those made by Joan Alker, Co-Executive Director of the GeorgetownCenter for Children and Families.
Alker’s research concluded that Medicaid expansion would cost Florida tax payers $2.7 billion over 10 years but would bring in $20 billion in federal funding. According to this research, hospitals would be reimbursed for a good share of their uncompensated care through the additional Medicaid funding.
Advocates of Medicaid expansion say that not only would it diminish the financial strain that hospitals suffer by providing uncompensated care, but it would also provide a form of health insurance for those who currently lack it.
But evidence from other states shows that this is not necessarily the scenario that occurs when eligibility for Medicaid is expanded. Mary Mayhew, the Commissioner of Maine’s Department of Health and Human Services, told lawmakers that they need not rely on projections of what would happen if Florida expanded Medicaid because Maine already did it, in 2002, and it has been a calamitous failure.
She reported that costs to hospitals for providing charity care have skyrocketed, despite Maine’s expansion of its Medicaid program. In the last five years, for instance, uncompensated care has more than doubled, to $194 million from $94 million, according to the Kennebec Journal.
Why? Because the number of uninsured residents was not significantly reduced. Indeed, only about 3,000 of Maine’s 136,000 uninsured residents signed up for Medicaid. At the same time, however, growth in Medicaid enrollment far exceeded projections, at great expense for the state.
How could it be that Medicaid enrollment skyrocketed while the number of uninsured remained virtually unchanged? Because many Maine residents who previously had insurance gave it up to join the Medicaid program instead.
Proponents of Medicaid expansion suggest that the 2008 recession caused this trend as people lost their jobs and joined Medicaid. Yet the trend started while the economy was still booming. Therefore, the trend cannot be attributed to the recession. Rather, it’s a nationwide trend that was occurring long before the recession — and it would only be exacerbated by expanding Medicaid.
The numbers tell the story. According to the U.S. Census Bureau, in 2002 some 66 percent of Maine residents had insurance, either through their employers or other means, 12 percent were uninsured, and 16 percent were on Medicaid. By 2011, the uninsured rate remained at 12 percent but the share of those who had insurance had dropped to 61 percent while the share on Medicaid had risen to 23 percent. (These percentages do not add up to 100 percent as it does not include other public programs such as Medicare and the Military.)
Maine was not alone in learning the error in the cost projections for Medicaid expansion. Tarren Bragdon, President and CEO of the Foundation for Government Accountability, said that predictions on enrollment and costs have been historically inaccurate across the nation.
Bragdon cited a case study of Arizona’s Medicaid expansion in 2000, which later resulted in people being kicked off the program after the fact because of erroneous projections of enrollment and serious underestimates of the cost.
Florida’s situation is similar. The state is seeing an increase in Medicaid enrollment and a lessening of private insurance coverage, all with no substantial change in the uninsured rates. Expanding Medicaid by making more people eligible may just make the problem worse.
At the heart of all this is the debate over how the newly eligible will be funded versus how the currently eligible will be funded. For those who would be newly eligible if Florida were to expand its Medicaid program, the federal government has pledged to cover 100 percent of the cost through the first three years and 90 percent thereafter.
However, the people who are currently eligible will continue to be federally funded at 56 percent, and there is considerable debate about whether the financially strapped federal government will still be paying 90 percent for some and 56 percent for others 10 years from now.
When Sen. Jeff Brandes, R-St. Petersburg, asked what would happen if the federal government reduced its funding rates for newly eligible, one of the panelists chimed in. “Whatever we don’t get in funding, we have to get from some other place,” alluding to higher taxes or funding cuts in other state programs.
Moreover, if the uninsured rate does not decline with Medicaid expansion, the hospitals’ costs for providing uncompensated won’t be reduced after all. That’s because Medicaid patients would make up a larger portion of the hospitals’ clientele, and Medicaid reimburses at a lower rate than private insurance.
Currently, Medicaid provides about 11 percent of the average Florida hospital’s revenue. So if Medicaid expands and the feds later reduce their share of the funding, the hospitals and the state government could both be worse off financially than before the expansion.
