On Uncompensated Care in U.S., It’s All About Money for Hospitals, Expert Claims

March 1, 2013

Investigative Reports

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ObamacareAs the S.C. House of Representatives begins debate on the 2013-14 budget in about 10 days, one of the biggest issues focuses on whether South Carolina will expand Medicaid under new federal health care rules coming in January 2014.

Gov. Nikki Haley has said the state won’t expand Medicaid under the Patient Protection and Affordable Care Act, also known as “Obamacare.” However, she supports helping  hospitals in the state that treat uninsured patients.

Meanwhile, House Republicans last week unveiled a plan for fiscal 2014 that would spend $62 million related to uncompensated care using state Department of  Health and Human Services surplus funds, according to media reports. That amount would rise to more than $80 million with a federal match.

Paying hospitals for treating the uninsured would be on top of the state’s current total budget in which 30 percent of the money already goes to Medicaid, the federal and state insurance program for the poor, said Sen. Shane Martin, R-Spartanburg and chairman of a Senate Medical Affairs subcommittee examining Obamacare, during a subcommittee hearing Thursday.

This fiscal year’s total ratified budget is $23.57 billion, Office of State Budget records show. The Medicaid share of the budget has risen from 14 percent of the budget since 2001, Martin said.

Uncompensated care was discussed in Thursday’s hearing by Ed Haislmaier, senior scholar on health care policy at the Washington, D.C.-based Heritage Foundation, a conservative think tank headed by former U.S. Sen. Jim DeMint of South Carolina.

Haislmaier did not talk about the proposed GOP health care plan for fiscal 2014 that emerged last week.  However, he commented on federal payments hospitals receive for uncompensated care, noting that hospitals must treat every person who walks in the door.

“Federal money is going to be cut, and hospitals are looking at state legislatures to backfill that,” said Haislmaier. “This should not be about the hospital’s balance sheet. This should be about what’s best for the patients; and I don’t think funneling more money to hospitals works, but politically that’s going to be difficult.”

He said money should go to patients, doctors and primary health clinics when someone has direct contact with a patient.

“The problem has been with both the federal and state government approaches (is they) have handed over Disproportionate Share or other supplemental  payments with no real accountability or no real accounting for what that money is going for,” Haislmaier said.

Disproportionate Share (DSH) is part of the federal Medicaid formula that directs money back to hospitals in each state for treating the uninsured.

This issue has become a big factor for hospitals because the U.S. Supreme Court last year ruled the federal government can’t force states to expand Medicaid. That uncertainty under implementation of the Affordable Care Act has hospital organizations seeking money in state budgets.

Haislmaier said all one has to do is read the amicus brief the American Hospital Association and other hospital groups submitted to the U.S. Supreme Court when justices heard oral arguments on Obamacare.

“It was remarkably self-serving, but it’s all laid out there – the quid pro quo was dollars,” he said. “It wasn’t in support of either party, but they simply wanted their money.”

“I’m not ready to paint the hospitals as greedy when we’ve gotten into their pockets by saying anyone who walks into a hospital has to be seen,” said Sen. Ray Cleary, R-Georgetown and a member of the full Medical Affairs Committee, during Thursday’s hearing.

Cleary accused Haislmaier of “throwing hospitals under the bus,” contending they couldn’t afford a cut of $300 million to $600 million.

“The grand bargain is how the hospitals themselves describe this in the amicus brief they filed with the Supreme Court. I’m taking them at their word on that,” Haislmaier responded.

Cleary also said some Republican governors who are talking about expanding Medicaid would adopt a sunset clause. If the state can’t afford it in three years, the expansion would be dropped, under those proposals.

Haislmaier told the subcommittee that state legislatures, not governors, have the last word on Medicaid expansion.

He also said even a blue state such as Maryland has not signed on yet for the implementation of Obamacare.

The Heritage Foundation scholar also called on senators to consider some other data. For example, he said for every 100 people, there are 20 visits to a hospital emergency room by those with private insurance. That increases to 40 ER visits for every 100 people if they are uninsured or have Medicare. The number climbs to 80 ER visits for every 100 people for those on Medicaid, he said.

The subcommittee heard support for Medicaid expansion from Frank Knapp, president and chief executive officer of the South Carolina Small Business Chamber of Commerce; Columbia resident Catherine Shuler, who said she has been declared “uninsurable” because of her multiple medical conditions; and Lynn Bailey, a local economist on health care policy.

“We have a 60-year-old dysfunctional business model,” said Bailey, adding that delaying reforms would make it more costly later.

The South Carolina chapter of the National Federation of Independent Business opposes Medicaid expansion. The NFIB wants sustainable, long-term cost savings in Medicaid, according to a letter from the organization that was read by Martin.

Olson can be reached at (803) 254-4411 or curt@thenerve.org. Follow him on Twitter @thenerve_curt and @olson_curt. Follow The Nerve on Facebook and on Twitter @thenervesc.