Hospital Riding Out State Budget Storm

Looming cuts in federal medical programs could prove costly

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Like a cold man with a bent umbrella in a hailstorm, Payson Regional Medical Center has so far survived the state budget storms — but is keeping a worried eye on the black sky.

The region depends critically on the services offered by the medical complex, which already writes off some $2 million dollars annually in unpaid medical bills run up by people without insurance.

But so far, hospital officials aren’t complaining. It would be much, much worse if not for Arizona Health Care Cost Containment (AHCCCS), the state’s innovative version of the federally funded Medicaid program.

The state legislature has come close to major cuts in the mostly federally-funded medical program for the working poor and nursing home patients, but has so far avoided deep cuts, said Chris Wolf, CEO of the medical center.

However, the state has frozen application to KidsCare, which provides medical insurance for children of the working poor for those parents who make too much to qualify for welfare but who can’t afford private insurance.

As a result, statewide enrollment in KidsCare has this year dropped from 47,000 to 33,000 — a decline of about 28 percent.

The state several years ago expanded AHCCCS to cover the children of the working poor, which means the state standards exceeded federal minimums. The Legislature initially tried to eliminate the program completely, but settled for a freeze in enrollment when the federal government threatened to cut off some $9 billion in Medicaid funding if the state reduced its benefits.

KidsCare had boosted the share of Arizona children with medical coverage from 74 percent to 84 percent, but now the number of uninsured children is rising rapidly again, according to the Children’s Action Alliance.

The number of Gila County children enrolled in KidsCare has dropped from 494 to 216 in the past two years, according to AHCCCS.

So far, the drop in coverage of children statewide hasn’t hit Payson Regional Medical Center too badly, said Sally Carrell, director of advanced reimbursement management for the medical center.

“This hospital has never been very high for pediatric admissions,” said Carrell.

However, potential cuts in the overall AHCCCS program could prove devastating, she said.

AHCCCS mostly covers the children of people making less than a poverty-level wage, and nursing home patients who have spent all their money. The freeze in KidsCare may have contributed to a sharp rise in the AHCCCS rolls, since unemployed parents whose children are covered by AHCCCS would lose coverage if they accepted even a minimum wage job.

AHCCCS has one key feature that makes it a life-saver for hospitals throughout the state, especially in rural areas like Gila County where nearly one-third of the residents are currently enrolled in AHCCCS.

If a person without medical insurance has a medical emergency, he or she often winds up at the emergency room with a medical bill that could exceed the person’s annual income. In such cases, patients can often qualify after-the-fact for AHCCCS, which will then pay the hospital and doctor bills at a negotiated discount.

In addition, AHCCCS provides coverage for a large share of the medical center’s regular patients, said Carrell — perhaps 25 or 30 percent.

Without AHCCCS, the hospital would face serious financial problems, said Carrell. “It would be devastating if we lost that.”

States are scrambling now to avoid a big reduction in federal payments for Medicaid.

Congress included in last year’s economic stimulus package a provision that significantly increased the federal share for Medicaid patients, which saved the states some $87 billion.

That increased federal share is set to expire in December, and Congress hasn’t yet acted to extend it.

As a result, the states could suddenly find themselves facing a significantly larger per-patient cost at the same time the Medicaid enrollment has jumped 21 percent, due to the effects of the recession and high unemployment.

The National Governor’s Association says state spending had dropped by about $75 billion in the past two years, partially offsetting the effect of the federal stimulus spending.

As a result, rural hospitals face continued threats, given their reliance on state support.

Wolf said Payson Regional Medical Center has been lucky so far.

Last year, the Legislature threatened to cut a pool of money intended to help rural hospitals deal with higher costs and staffing shortages, which is called Savepool.

The Legislature relented at the last moment, which saved Payson Regional Medical Center about $600,000.

Moreover, AHCCCS pays competitive rates — unlike many state Medicaid programs. AHCCCS operates like a health maintenance organization, which means it contracts with health plans and pays a set amount each month per patient, regardless of the services actually used.

AHCCCS has significantly lower costs than conventional Medicaid programs, but has ranked high on service and outcomes in national surveys.

“It’s a hard pill to swallow when the state threatens to take away your Savepool dollars or KidsCare is getting cut or physician payments aren’t adjusted on a reasonable basis,” said Wolf.

“But so far, we’re fortunate in this state compared to places like California and Texas — where they’re paying hospitals with IOUs. I don’t know how you take an IOU to Bashas’ for your groceries.”

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