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Tuesday, December 22, 2009
Medicaid Cuts Slam Hospitals in N.M.
By Dan Boyd
Journal Capitol Bureau
SANTA FE — Hospital administrators and business leaders say recent cuts in New Mexico's Medicaid provider rates could have serious consequences, including a reduction in medical services for the poor.
Another possible consequence: Providers could end up charging private insurance companies more to offset the lost revenue, resulting in higher premiums for people who buy health insurance or get it through their employers.
The 3 percent state cut to hospitals, doctors and other Medicaid providers is a product of the New Mexico's ongoing budget shortfall, which has already triggered broad spending reductions and furloughs for 17,000 state employees. The lower reimbursement rate took effect Dec. 1.
Jeff Dye, president and CEO of the New Mexico Hospital Association, said the total cost to hospitals from the cuts will probably amount to $117 million, although that figure is higher than the estimate by the state's Human Services Department.
"I think there will be some hard choices that will be made about the types of services that are offered," Dye said. "Patients don't go away, but the reimbursement is going away."
The cut affects inpatient and outpatient services at hospitals and payments to doctors and other Medicaid providers.
Beverlee McClure, president and CEO of the New Mexico Association of Commerce and Industry, said private health insurance premiums could increase by 3 percent to 8 percent, based on a review of the impact of similar cuts in other states, after costs are passed along by providers.
"Basically, what they're going to do is cost shift," she said. "It still costs them the same to treat patients, even though they won't be receiving as much in return."
Hospitals are barred from turning away emergency room patients regardless of ability to pay, but aren't required to provide nonemergency services.
New Mexico has expanded Medicaid in recent years to provide more coverage to uninsured children and currently offers a broad range of services that aren't required by the federal government.
Cuts called fair
Administrators in the state's Human Services Department say the reduction in provider rates is fair, given that rates were increased during both of the past two budget years.
"Everybody is going to experience a little bit of frustration helping us meet our budget," Medical Assistance Division Director Carolyn Ingram said Monday. "We thought it was reasonable and didn't seem like overkill to ask for a 3 percent reduction."
The Human Services Department, which oversees Medicaid, expects it will save between $5.5 million and $9 million by cutting provider rates by 3 percent, said department spokeswoman Betina Gonzales McCracken.
The cuts represent one of several cost-containment measures the department is taking to rein in its spending this year by $20 million. The state's Medicaid budget faces a $45 million shortfall during the current budget year and a projected deficit of $300 million next year.
However, due to a federal matching provision for Medicaid spending, the actual impact of the rate cuts will be much greater than just the state funding being slashed.
The $20 million trimmed by the provider rate cuts and other cost containment measures balloons to $100 million when the lost federal funding is factored in, Gonzales McCracken said.
The hospital association says the reduction isn't justifiable.
"It really feels like the department is attempting to balance their whole budget shortfall on the backs of hospitals," Dye said.
Hurt by rate cuts
Presbyterian Healthcare President and CEO Jim Hinton said many hospitals already are on the verge of losing money.
Presbyterian, a nonprofit hospital system that operates seven hospitals statewide and runs a health insurance plan, is still figuring out how it will deal with the state rate cuts, which apply to both inpatient and outpatient procedures.
"I think this is one of those times when people really have to work together to provide services we've been asked to provide with the resources we've been allocated," Hinton said.
Hinton also questioned the wisdom of the provider rate cuts due to the subsequent loss of federal matching dollars.
"The fact there's this incredible multiplier I think requires some special consideration," he said.
The Human Services Department did consider the loss of potential federal funding but ultimately had no choice but to reduce costs, Ingram said.
"When you're shopping at a discount store and you can get four shirts for a dollar, you still need to pay that dollar," she said.
Meanwhile, about one-quarter of New Mexico residents don't have health insurance coverage, according to a recent estimate, giving New Mexico the nation's second-highest uninsured rate. Health care legislation pending in Congress would add an estimated 125,000 people in New Mexico to the Medicaid rolls.
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