Rich Daly | February 9, 2016
Hospital advocates have raised concerns about some of the proposed cuts, which could serve as the basis for future debt reduction initiatives.
Feb. 9—The Obama administration’s final year is expected to feature a push for more states to expand eligibility for Medicaid, including through a funding proposal in the president’s budget.
President Barack Obama’s $4.1 trillion FY17 budget includes $2.6 billion to provide three years of full funding for the expansion of eligibility in any of the 20 states that have not yet adopted it. Medicaid expansion was authorized by the Affordable Care Act (ACA), which provides full federal coverage of the cost of expansion for three years ending in 2016.
Some Medicaid expansion proponents have cited the loss of full federal funding—in 2017 it begins to taper to a 90 percent match—as creating a financial barrier to expansion in the remaining states.
“We want to encourage more states to join the 30 states and the District of Columbia that have already expanded through common-sense approaches,” Sylvia Burwell, secretary of the U.S. Department of Health and Human Services (HHS), said at a budget-release news conference.
The proposal is likely dead on arrival in the Republican-led Congress, which for the first time cleared a full repeal of the Medicaid expansion and other major ACA provisions at the beginning of the year.
However, Obama’s budget provision called attention to the growing issue of how to fund the state share of the Medicaid expansion. Both expansion and non-expansion states are considering the use of hospital funding to help cover the state share of the expansion cost when partial state funding begins in 2017, according to budget experts. Despite the cost to states, it’s an approach they may have an incentive to pursue.
“In the states that have expanded Medicaid, there is a lower percentage and number of hospitals closing because you are taking care of that uncompensated care,” Burwell said.
Asked about the source of Burwell’s claim, an HHS spokesman cited reports that included a March 2015 HHS model that projecting insurance rate improvements and Medicaid expansions reduced hospital uncompensated care by $7.4 billion in 2014, including $5 billion reduced in expansion states.
Although none of the HHS sources specifically compared expansions and closures, several pro-expansion organizations have reported such findings. The left-leaning advocacy group Families USA issued a December 2014 analysis in which it noted that expansion states had a total of 11 rural hospital closures since 2010, while non-expansion states had 20 such closures.
Contrary findings include a January 2016 analysis by researchers from Indiana University and the Wharton School at the University of Pennsylvania, who found—when controlling for critical access hospital status—that since 2010 hospitals were less likely to open in Medicaid expansion states.
All but one of the eight states with major reductions in their uninsured rates in 2015 had approved the Medicaid eligibility expansion, according to a new report from the Centers for Medicare & Medicaid Services. The uninsured rate was 8.4 percent in Medicaid expansion states and 13.9 percent in non-expansion states, according to the report.
Other Medicaid initiatives in the FY17 proposed budget included $30 billion to boost provider rates in Puerto Rico and U.S. territories; $11 billion to allow states to institute continuous 12-month Medicaid eligibility for adults; $6.6 billion in reduced Medicaid disproportionate share hospital payments; and $9.5 billion to reestablish the Medicaid primary care provider pay boost.
Other Major Provisions
Among the budget provisions with direct hospital revenue impacts over the coming 10 years is a $1.6 billion reduction in critical access hospital (CAH) payments based on a rate cut from 101 percent to 100 percent of reasonable costs. Another $880 million in savings would come from prohibiting the CAH designation for facilities less than 10 miles from the nearest hospital. The budget also would cut $33 billion from Medicare’s coverage of bad debts.
The proposed Medicare bad debt cut was among the proposed cuts that drew hospital advocates’ concerns. Those cuts “will strain the ability of our hospitals to deliver care to disadvantaged patients and underserved communities,” Bruce Siegel, MD, president and CEO America’s Essential Hospitals, said in a written statement.
Hospital advocates have worried that including such proposed cuts in Obama’s budget can legitimize them as pay-fors in Republican-led congressional debt-reduction initiatives.
The budget also would garner more savings by boosting the savings target of the ACA’s Independent Payment Advisory Board (IPAB). The controversial cost-control body would be directed to find $36.4 billion in additional savings over the next 10 years.
Other major provisions in the president’s budget with the potential to affect hospitals include $121 billion in savings from aligning Medicare and Medicaid drug payment policies for low-income beneficiaries; $86 billion in Medicare payment cuts to post-acute care providers; $9.8 billion in savings from bundled payments for post-acute care providers; and $9.2 billion in Medicare hospice payment cuts.
Budget-neutral programs in the proposal included expanded use of alternative payment models (APMs) and hospital bonus payments for collaborating with certain APMs.
The administration also touted the $250 million included for the Office of Medicare Hearings and Appeals (OMHA), which has struggled with a massive backlog of Medicare claim-denial appeals since a major enforcement push on hospital short-stay episodes. The budget funding aims to increase adjudication capacity and advance other strategies to alleviate the current backlog. Also included is $44.2 million aimed at establishing greater participation by the Centers for Medicare & Medicaid Services in hearings by administrative law judges at OMHA and automation of the first and second levels of Medicare payment appeal.
The budget also would boost program integrity funding by $199 million, including $44 million for discretionary healthcare fraud and abuse control, $130 million in recovered funds by recovery audit contractors to reduce improper payments in Medicare, and $25 million in new mandatory Medicaid program integrity funding. The budget’s fraud and abuse boost was expected to garner $23.8 billion in Medicare and Medicaid savings over 10 years.
Insurance Provisions
The budget’s insurance provisions also drew attention. For instance, the budget included $77.2 billion in cuts to reform Medicare Advantage payments “to increase the efficiency and sustainability of the program.”
The budget also derived $24 billion in savings from requiring remittances from Medicaid managed care plans for medical loss ratios.
Also included was a $2.4 billion proposal to eliminate beneficiary coinsurance for screening colonoscopies with polyp removal.
Source: HFMA