Hospitals Warn Super Committee Against Obama’s Proposed Medicaid Reductions

A coalition of hospitals is urging the super committee to avoid Obama administration-backed reductions to the Medicaid program, warning that a federal cut in funding would “simply shift existing and growing costs onto states, providers and beneficiaries, and damaging the nation’s already fragile economy.” In a latter sent to the committee last night, the coalition specifically singled out proposals to “blend” Medicaid reimbursement rates and limit states’ use of provider taxes — two proposals Obama included in his deficit reduction plan:

The nation’s hospital systems recognize that Medicaid costs are putting significant pressure on federal and state budgets as millions have lost their jobs and now need this critical safety net. We would like to work with you to find positive solutions to alleviate this pressure while maintaining a strong safety net. Sound policy changes would reduce the overall costs in the health care system—not simply shift existing and growing costs onto states, providers and beneficiaries, and damaging the nation’s already fragile economy. Two proposals likely under consideration by the Joint Select Committee, unfortunately, do not meet this test.

One proposal would combine the various Medicaid Federal Medical Assistance Percentages (FMAPs) provided to states into a single “blended rate” for all populations and services…A separate proposal would limit states’ use of provider taxes (also known as provider assessments) to help fund the non-federal share of Medicaid costs. Provider taxes, which are paid by health care providers, are tax revenues that are widely used by states to pay for the state share of Medicaid costs. Provider taxes allow states to maintain a functioning Medicaid program. Cutting state use of provider taxes limits states’ flexibility in financing their Medicaid program and will hurt patients.

All this sounds benevolent enough, but hospitals fear that a drop in Medicaid funding will result in an increase in uncompensated care and force providers to offer emergency treatments to a growing uninsured population. They’re also lobbying the committee to raise the Medicare eligibility age and move younger seniors into private policies, which typically pay higher reimbursements to providers. What we’re seeing is concern about the bottom line.

But this minor outrage over “blended rates” and provider taxes is just a small preview of the kind of resistance Republicans will face from hospitals, doctors, and their lobbyists if they ever make a serious push to block grant the Medicaid program and significantly reduce federal health care funding to the states.