How The GOP Is Putting America’s Safety Net Hospitals At Risk Of Bankruptcy

In light of Republican-led states’ entrenched opposition to Obamacare’s Medicaid expansion, safety net hospitals around the country have expressed fears that they could go bankrupt as their government funding gets cut. On Monday, the Center for Medicare and Medicaid Services (CMS) announced that it would help these embattled hospitals by paring back planned cuts to their federal reimbursements.

In an attempt to cut government health expenditures, Obamacare included fairly deep cuts to so-called “disproportionate share” hospitals’ (DSHs’) — safety net facilities that cater mostly to the poor and uninsured — reimbursement payments. These cuts were intended to be offset by an influx of newly-insured Americans covered under the states’ expanded Medicaid programs.

But since the Supreme Court ruled the expansion optional, red states with a large number of low-income and uninsured residents have largely refused to take part in the Medicaid expansion, thereby creating a disastrous funding problem for safety net hospitals in these states. The CMS’s new proposed regulations represent an effort to avert those disastrous cuts as states get their acts together:

The Centers for Medicare & Medicaid Services proposed on Monday that for the next two years, the DSH dollars be reduced based partly on a state’s percent of uninsured residents (states with the lowest percent of uninsured receive larger reductions). CMS also seeks in the proposal to protect state DSH funding that is used to increase coverage under Medicaid demonstration waivers. […]

“… since some states have yet to decide whether to expand Medicaid, this proposed rule will not discourage expansion, nor will it penalize hospitals in those states that have yet to make a decision,” [Rick Pollack, executive vice president of the American Hospital Association,] said.

However, CMS’s new proposal is a funding band-aid, not a permanent fix. The far more responsible and efficient way to take the heat off of America’s safety net hospitals — while securing low-income Americans’ medical and financial well-being — would be for highly uninsured states to accept the health law’s generous funding to expand Medicaid.

In fact, that’s exactly why some GOP governors such as Arizona’s Jan Brewer and Florida’s Rick Scott have reversed course and decided to endorse the Medicaid expansion — because hospital associations in their states have been warning that noncompliance in the face the upcoming payment cuts would cost them tens of billions of dollars and possibly force them out of business, leaving millions of America’s poor without recourse for medical care. Unfortunately, not all Republican state leaders and legislators seem to be swayed by that argument, forcing the CMS to take action and stave off safety net hospitals’ fiscal ruin.

But seeing as even the GOP governors who have endorsed expansion are struggling to convince skeptical legislators in their own party, the temporary fix is crucial to making sure that safety net hospitals — and the millions of poor Americans who rely on them — don’t end up as the collateral damage of a political fistfight over Obamacare. Arizona, Florida, Texas, and Louisiana — four GOP states that appear increasingly unlikely to expand Medicaid this year — have close to 12 million uninsured residents alone, approximately half of whom live below 138 percent of the Federal Poverty Level (FPL) and would likely gain Medicaid coverage under the expansion.