January 4, 2010
IN THE epic tug of war between containing medical spending and securing access to hospitals for lower-income people, Massachusetts faces a range of options from raising Medicaid reimbursement rates across the board to holding firm on payments that hospitals claim cover much less than the true cost of care. There is, however, a sensible middle ground.
A group of financially strapped hospitals that serve a disproportionate number of publicly insured patients has gone to court to make the case that the state has stiffed them on legal commitments for fair reimbursements. The state should save legal costs by acting quickly to raise the reimbursement level for these hospitals, rather than take on the much more costly option of raising Medicaid reimbursements across the board.
The recession has dealt a one-two punch to safety-net hospitals like those in Holyoke, Brockton, and Haverhill, where publicly insured patients make up 63 percent or more of all patients. The downturn has also depleted the state’s coffers, making it difficult for the state to obey a longstanding state law requiring full reimbursement for safety-net hospitals’ patients covered by Medicaid and the state-subsidized Commonwealth Care.
At the same time, the spike in layoffs has forced more people onto the rolls of the state programs. In better times, hospitals might have been able to shift some of the unreimbursed costs of their Medicaid and Medicare patients onto the privately insured. In a recession, there are fewer such patients to bear that burden.
According to the six hospitals suing the state, Medicaid has been paying just 40 percent to 86 percent of the hospitals’ actual costs over the past six years. In the past three years, the gap between the hospitals’ costs and their Medicaid payments is more than $70 million.
In several cases, the hospitals are leading employers in their areas. Staff reductions forced on them by the state’s low reimbursements have only added to their regions’ economic woes. The state will not continue to be a national leader in health reform if its Medicaid rates undermine the very hospitals that are on the front lines of universal care.