Virginia hospitals are getting a taste of what industry officials fear may lie ahead for them if the state doesn't expand its Medicaid program in the face of capped or reduced payments for the care they provided to uninsured patients.
On Monday, Gov. Bob McDonnell announced savings of $21.7 million next year under a cap on state reimbursement of hospitals that bear a "disproportionate share" of the burden of caring for uninsured or underinsured Virginians.
More than three dozen Virginia hospitals will lose an equal amount of federal reimbursement under a federal cap that the state reached for the first time in the budget year that ended June 30.
McDonnell announced the savings the same day he proposed to remove $1.1 billion in federal funding from the budget that would go toward beginning the expansion of Medicaid in the first half of 2014 under the Patient Protection and Affordable Care Act.
The federal law includes targets for reducing federal and state reimbursements to hospitals as the uninsured find coverage under Medicaid or new insurance exchanges, and that worries Virginia hospital officials.
"It will get worse," said Dr. Sheldon M. Retchin, chief executive officer of Virginia Commonwealth University Medical Center, the biggest provider of medical care to the uninsured and underinsured in the state. "It will get dramatically worse if the (reimbursement) is cut without Medicaid expansion."
Retchin and other hospital industry officials agree with McDonnell's position that the federal government must allow significant reforms to Virginia's Medicaid program before the state expands it.
But health care advocates and political critics assailed the governor's decision to remove the funding for the state to begin an expansion that would bring more than $21 billion in federal Medicaid spending over the first seven years.
"In removing federal funds that would have flowed to Virginia to pay for the cost of expanding Medicaid insurance, the governor is effectively denying health insurance coverage to hundreds of thousands of Virginians -- many of them working parents -- and their families," said Michael Cassidy, president of The Commonwealth Institute for Fiscal Analysis.
State officials said the decision to remove the money for Medicaid expansion simply reflects the ruling of the U.S. Supreme Court on June 28 that the expansion is optional rather than mandatory under the Affordable Care Act.
"It wasn't optional when it went in," Finance Secretary Richard D. "Ric" Brown said Monday. "It's now an optional program."
The McDonnell administration decided to cap state spending on disproportionate share reimbursements because Virginia hospitals already had reached the federal cap on its share of the costs of uncompensated medical care.
At the same time, the state decided to forgo revising the formula for allocating the money among hospitals, as required every three years. State officials said they want to study the formula for a year, since additional funding isn't available anyway.
Katharine M. Webb, senior vice president at the Virginia Hospital & Healthcare Association, supported the governor's decision to delay the revision, which would hurt some hospitals and help others, without closer study.
"It's even more critical that you base any new distribution of limited disproportionate share funding on accurate information," Webb said. "If there were more money, it would be a different story."
One legislator said the decision to cap state reimbursements to hospitals is a warning sign for VCU and the University of Virginia Medical Center, the state's second-largest provider of uncompensated care.
"I think it's the tip of the iceberg," said Sen. John Watkins, R-Powhatan. "I think it's an indicator of where this thing is heading."
Distributed by MCT Information Services
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