Bipartisan California Lawmakers Seek to Avert Cuts to Hospitals’ Medicaid Payments

Concerned about the nation’s health care safety net, a bipartisan coalition of California’s congressional leaders urged the U.S. House leadership Tuesday not to cut off supplemental Medicaid payments to hospitals because doing so could jeopardize care for millions.

These supplemental payments, known as disproportionate share allotments, provide “an essential funding source helping safety-net hospitals serve the uninsured and underinsured residents of their communities,” a group of 47 legislators stated in a letter to House Speaker Nancy Pelosi and House Minority Leader Kevin McCarthy. “They help offset the cost of uncompensated care these hospitals provide.”

Rural hospitals and urban medical centers that serve the poor and indigent will be the hardest hit if the payments are reduced. Congressional leaders are weighing the matter as part of negotiations on an omnibus resolution, essentially a bill, to fund the federal government for the current fiscal year ending in September 2020.

If they make no changes in the special Medicaid funding, the so-called DSH allotments will drop by $4 billion in the 2019-20 fiscal year and by $8 billion between fiscal years 2021-25. Lawmakers initially mandated these cuts as part of the Affordable Care Act because they expected the number of uninsured patients to drop dramatically once the law was implemented. As the number of uninsured patients fell, the logic went, hospitals would need less supplemental funding.

The percentage of uninsured Americans dropped to a low of 10.9 percent in 2016, down from 18 percent in 2013, the year before the ACA was implemented, according to the Gallup National Health and Well-being Index. That figure, however, rose to 13.7 percent by the end of 2018, Gallup research showed, after the Trump Administration began taking steps to dismantle the Affordable Care Act. Those actions included:

*  Reducing the open enrollment period to 45 days from three months.

*  Cutting the funding of outreach and publicity by 90 percent.

*  Providing 40 percent less funding to groups that sign up consumers.

*  Eliminating the individual mandate that required U.S. citizens to either buy health coverage or pay a penalty on their federal taxes.

“We’ve seen this administration undermine health care reform for years – and as a result not enough people have access to the insurance they need to stay healthy. A lot of them end up in the hospital as a result, but can’t afford to pay for it,” said U.S. Rep. Josh Harder, D-Modesto, whose District 10 comprises a broad swath of the Central Valley. “Hospitals – especially those serving rural areas or in places with high poverty rates, can’t keep providing these services without help. Congress needs to undo the damage to our health care system that this administration is doing and make sure we don’t lose this funding.”

While Harder is a Democrat, the 47 signatures on the letter showed that concern about the financial stability of hospitals crosses party lines. Others signing the letter included Republican stalwarts Duncan Hunter and Doug LaMalfa, as well as Democrats Ami Bera and Doris Matsui.

If the planned cuts are not stopped, California hospitals stand to lose as much as $500 million in the current fiscal year and as much as $950 million from fiscal 2021-25, the representatives said.

“Cuts of the magnitude projected could jeopardize access to care for millions – not only the uninsured and individuals on Medicaid but also those who rely on the system’s essential primary care, specialty and tertiary services,” the legislators wrote. “Congress has acknowledged the importance of Medicaid DSH to supporting the American health care safety net and has never permitted the reduction of DSH allotments to take effect.”

Even in California, where the rate of uninsured residents has dropped down to 7.2 percent from 17.2 percent in 2013, a number of hospitals still are facing financial challenges because of the number of uninsured and underinsured patients in their populations, said Jan Emerson-Shea, the vice president for external affairs at the California Hospital Association.

Much of the gain in insuring California residents came from the expansion of Medi-Cal, California’s Medicaid health insurance program, Emerson-Shea said, rather than from commercial insurance. Roughly 3.8 million people gained coverage through Medi-Cal because of the ACA expansion, according to the California Health Care Foundation.

“Where before we were not getting any money for treating an uninsured patient, that same individual has now gone on the Medi-Cal rolls,” Emerson-Shea said, “so we’re getting 78 cents on every dollar of care. We’re getting some money, but we’re still not breaking even. Those DSH funds are really essential, especially to those hospitals treating high volumes of uninsured patients.”

Eighty percent of the patient population at some rural and urban hospitals comes from uninsured or Medi-Cal patients, Emerson-Shea said, and the supplemental Medicaid payments go to that treat the highest numbers of indigent patients.


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