With Medicaid Cuts Pending, Urban Hospitals Plead for Protection

Andrew Kitchenman | November 4, 2013 | Health Care
Safety-net hospital advocates say funding reductions could be premature, repeat call for local tax

The hospitals that serve New Jersey’s poorest residents are asking state officials and legislators for protection from potential cuts in federal Medicaid funding, arguing that it’s premature to say how quickly they will benefit from increasing the number of residents with health insurance.

Under the 2010 Affordable Care Act, most Americans are required to have health insurance, which was expected to benefit the hospitals that have long provided charity care to the uninsured. With hospitals expected to receive more insurance payments, the law included a series of cuts to the federal program that traditionally funded charity care.

But hospitals are concerned that the cuts will occur before enough people become newly insured through private insurance.

The cuts are due begin on January 1, with New Jersey hospitals potentially seeing a $29.3 million annual reduction in disproportionate share hospital (DSH) funding, which is part of the federal Medicaid program, according to Suzanne Ianni, president and CEO of the Hospital Alliance of New Jersey. The alliance, which represents the state’s 16 safety-net hospitals, focused on the looming spending cuts during an event held Friday to mark the organization’s 20th anniversary.

While President Barack Obama has requested that the cuts be delayed until the fiscal year that starts next October, the delay itself has been stalled as part of ongoing federal budget talks.

Ianni believes that the safety-net hospitals should be protected from the cuts when they occur, at least until it’s clear that insurance payment increases will offset the cuts that the hospitals would see.

The ACA was premature in scheduling funding cuts to hospitals before the increase in insurance clients was assured, according to alliance Chairman Joseph F. Scott, president and CEO of LibertyHealth System, which operates Jersey City Medical Center.

While all Americans are required to buy insurance under the provisions of the ACA, Scott is concerned that the penalty in the first year – the greater of $95 or 1 percent of a person’s income – will not be enough of an incentive.

Technical problems that have plagued the website for the federal healthcare marketplace or exchange also worry Scott. The site, healthcare.gov, is intended to be a one-stop shop for residents to purchase insurance and learn whether they’re eligible for federal insurance subsidies.

“The whole thought process was hospitals like ours would turn around and see all these people with insurance,” Scott said. “And now I’m concerned. Between what’s happening with the exchange, (hospitals) getting people to understand why it’s important for them to have insurance and this whole timing issue of getting the cuts before people are on the exchange, it could have devastating impacts on hospitals that serve the highest-need populations.”

The alliance also is pushing fora local hospital tax, which would allow the safety-net hospitals to qualify for federal funding to match the local funding. The bill is opposed by hospitals that serve fewer low-income residents, which contend that it sets a bad precedent for more local hospital taxes.

“It’s crazy for us not to get those matching dollars, particularly in light of the cuts that are coming,” Scott said, adding that opponents of the bill “have high operating margins and they don’t serve the medically needy,” and noting that other states have begun to explore whether hospitals with high operating margins should maintain their nonprofit status.

The alliance’s lobbying effort at the state level is matched by a federal effort. Dr. Bruce Siegel, leader of America’s Essential Hospitals, called the ACA an important milestone in improving the country’s healthcare system, saying it could provide insurance for 600,000 to 800,000 New Jerseyans.

“It will make this state a better place to do business,” Siegel said, before adding that the bill’s treatment of Medicaid cuts was an error. “Purely and simply, getting the Affordable Care Act right means getting the safety-net right.”

If the funding cuts occur without offsetting gains in insurance payments, “you’ll be forced to make choices that no community should ever have to make,” said Siegel, who was state health commissioner from 1992 to 1994.

Siegel’s organization, which represents safety-net hospitals nationally, is pushing for a three-year delay in any Medicaid funding cuts, so that federal officials can assess how the increase in insurance is progressing.

“It’s foolhardy and it’s reckless,” to make cuts based on pre-ACA data, Siegel said.

East Orange General Hospital President and CEO Kevin Slavin said cuts to his hospital’s budget would force it to look at cutting programs that serve the broader region so it could maintain services to its local community.

“The economic impact that these hospitals have on their cities is going to suffer as well,” Slavin said. “I think we’ve all learned that when the urban hospitals in the past have closed, it’s not just healthcare and the individuals that have suffered, communities have suffered, with businesses closing, banks closing around the hospitals.”

Sister Jane Frances Brady, the alliance’s first leader, attended the event. She said the ongoing struggles for funding for the safety-net hospitals showed the continuing need for the alliance.

“I don’t think there will ever be a time when these safety-net hospitals are financially secure,” said Brady, adding that the alliance plays a vital role in protecting their interests.