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The most significant health threat facing Connecticut residents today is not influenza, obesity, diabetes, heart disease or cancer. No, it is the state budget proposal to cut $650 million from Connecticut's 30 hospitals over the next three years: $103 million the fiscal year starting July 1; $207 million in fiscal year 2014; and $341.5 million the next year. Left unchecked, this reckless plan will eviscerate Connecticut hospitals, cause massive job loss among hospital workers, and result in sharp reductions in patient access.
Almost as galling is the disingenuousness with which its proponents are packaging this calamity. The fable goes something like this: "Hospitals won't really be hurt by these cuts because they got a 'windfall' when the former State Administered General Assistance (SAGA) program was folded into Medicaid. They will get another 'windfall' when the new health insurance exchange comes on line late this year and currently uninsured Connecticut residents will obtain federally subsidized health insurance. So, taken together, hospitals will be getting more revenue and will experience less bad debt and charity care. Therefore Connecticut hospitals can do without $650 million. Everybody wins."
There's only one problem - none of it is true.
To understand the ruse, it is important to have a basic understanding of how Medicaid works. Medicaid is the government insurance plan for low-income children and adults. Its funding comes from a combination of state and federal sources. In brief, for every $1 in state funds applied to Medicaid, the federal government provides a $1 match. Within certain limits, each state establishes its own eligibility requirements, creates its own schedule of benefits, and, finally, sets its own payment rates for doctors, hospitals, and other providers. As is true with most other northeastern states, Connecticut has both generous eligibility criteria and schedule of benefits. But the Connecticut Medicaid program, administered by the Department of Social Services, does not pay providers well or fairly.
When the state rolled the so-called SAGA population into Medicaid, the 1:1 matching formula brought in additional funds to Connecticut. The typical Connecticut hospital used to get about 70 cents for every $1 of care it provides to a Medicaid patient - a 30-cent loss. For the so-called SAGA patients, the losses were substantially greater: for every $1 of care provided to a SAGA patient, hospitals received about 35 cents back - a 65-cent loss.
When the state blended SAGA into Medicaid, hospital funding increased from getting 35 cents back to 70 cents. This is where state officials invoke the "windfall" reference. But just to be clear: hospitals still lose money every time they care for a Medicaid recipient - they just lose less on each patient.
What state officials conveniently ignore is that between 2007 and 2012 the number of Medicaid enrollees jumped from 424,219 to 565,417. The reduction in loss from folding the SAGA population into the Medicaid program was dwarfed by the enormity of the losses resulting from caring for so many more people who used to have commercial insurance, but as a result of unemployment and insurance loss now sought and obtained Medicaid coverage. In 2007, Connecticut's hospitals collectively lost $847,000 every day caring for Medicaid patients. By 2014, this loss will grow to a projected $2.09 million every day.
Proponents of this wayward budget proposal also claim that the new health insurance exchanges will infuse additional funds into Connecticut's beleaguered hospitals. Not likely. First, as the state's budget secretary just admitted to the Appropriations Committee, no one yet knows how the exchanges will actually work, how many people will obtain insurance through them, and most of all, no one knows either the cost of the plans or how providers will be paid. Second, the money to pay for the federally-subsidized plans that are supposed to become available through the exchanges was obtained, in large part, from $155 billion in Medicare cuts to America's hospitals over 10 years programmed into the new Affordable Care Act.
OK, low levels of payment from Medicaid to Connecticut hospitals may not seem fair, but many things in life aren't fair. There's nothing inherently sinister about the proposed $650 million cut, right? Wrong. This is where the real hocus-pocus begins.
Two years ago, Connecticut, trying to deal with its burgeoning financial crisis, seized upon a scheme employed by other cash-strapped states. Remember the $1 for $1 federal/state "match" available in the Medicaid program? Connecticut officials realized that if they imposed a tax on hospitals they could leverage additional federal dollars to come into Connecticut. It may be poor public policy to tax sick people and the institutions that care for them, but it turns out it is legal to do so.
Hospitals were told that they would get their tax payments back plus a little. The newly obtained federal funds totaled $200 million per year: $50 million went to the hospitals to help reduce a small part of the losses incurred treating the uninsured and those enrolled in Medicaid; and, $150 million went to the state to reduce its deficit. What's different now is that the state, under the proposed budget, would keep the tax on hospitals in place, but not, as promised, return most of the dollars provided by the hospitals - shorting these institutions by $131 million in 2014, $270 million in 2015.
The state is proposing redirection of funds intended for patient care to its own General Fund to fix its budget shortfall.
It has concocted a brilliant, if dishonest, communication strategy to sell its extraordinarily harmful plan:
• Claim there are no new taxes (in reality, this is a major new tax);
• Claim the safety net for Medicaid and other at-risk persons will not be adversely affected (in reality, it will be shredded);
• Claim that this policy won't hurt hospitals. (In reality, Medicaid patients will still be coming to our hospitals, and we are obligated to treat them, except the state will now take away $650 million that was supposed pay for care provided to Medicaid patients. More broadly, this policy will adversely affect all patients. Without the money owed us, we won't be able to pay our staffs and will have to eliminate some services and make others less available.
Let Gov. Dannel P. Malloy and the General Assembly know you get it and the ruse isn't working. Act now to protect your health and that of your family and friends and before irreparable damage is done to Connecticut hospitals.
Bruce Cummings is president and CEO of Lawrence + Memorial Hospital.