Damages from Medicaid Politics Won't Stop at Hospitals

Try to imagine the ripple effect of punching a $4 billion hole in the economy of a state whose lawmakers refuse federal Medicaid subsidies. It's not just hospital jobs that will disappear. Ancillary support jobs in healthcare and other businesses will wither, too.

Despite the nasty rhetoric, it seemed illogical that 14 states would reject billions of dollars in federal subsidies to pay for the expansion of Medicaid just to make a political point. There was a sense that political leaders in these recalcitrant states were bluffing to save face, but would eventually find a way to expand the program when they realized what they were giving up and who they were hurting.

Wrong!

And now that most state legislatures across the nation have adjourned for the summer with no intention of returning until next year, this is the reality we're left with at least for the next year or so.

A recent RAND study in Health Affairs estimates that the decision not to expand Medicaid in 14 states means that 3.6 million fewer lives will be covered, federal "transfers" to those states will drop by $8.4 billion, and those states' spending for uncompensated care will increase by $1 billion in 2016.

It would be easy enough to write off the decision to reject Medicaid money as just plain dumb. Unfortunately, it's more complicated than that because innocent people are going to be hurt by this ideological line toed in the sand by lawmakers who really ought to know better.

Two predictions: First, the people hurt by the refusal to expand Medicaid will be the sickest, most vulnerable and poorest in these states. And make no mistake about it: People will die when cash-strapped hospitals are forced cut back on services, personnel and access. This is not hyperbole. This must be understood.

Second: All of these states that are now so boldly rejecting Medicaid expansion money will eventually fold when the public comes to grasp how much this ideology is costing them. It might take a year. It might take longer. Bank on it.  

Even vociferous Texas, with close to 30% of its population uninsured, will join the expansion in some way, shape, or form. That much was made clear earlier this month when Dallas-based Tenet Healthcare Corp. acquired Vanguard Health System and its considerable holdings in the Lone Star State.  

Like hundreds of his colleagues, David M. Zechman, CEO and President of Ozarks Medical Center, in West Plains, MO, finds himself caught in the middle of an ideological war between state lawmakers who are hostile to the Patient Protection and Affordable Care Act and federal bureaucrats charged with implementing its reforms.

The Missouri General Assembly has declined to expand the Medicaid roles until state Senate and House review panels can issue a report. Zechman says he doesn't see that happening for at least six to nine months. As a result, hospitals in Missouri are bracing for a triple-whammy:

• They're the recipients of a 2% reduction in Medicare reimbursements owing to the mandatory cuts brought on by sequestration.
• Because their Medicaid roles won't expand, they will continue to treat a significant uninsured and indigent population with little hope of reimbursement.
• The disproportionate share payments that are designed to offset charity care costs for hospitals such as OMC are being eliminated on Oct. 1 when the Medicaid expansion goes into effect.

"We are going to get that cut anyway even though Medicaid expansion is not happening in Missouri," Zechman says. "The disproportionate share cut was made and it was anticipated that the hospitals would recoup that money back through expanded Medicaid and the insurance exchanges. The exchanges might get a little back, but we aren't going to get anything from the Medicaid expansion."

It's not just the hospitals and the vulnerable who will be hurt.  

A University of Missouri analysis commissioned by the Missouri Hospital Association estimates that the Show Me State will be shown that it could lose more than 9,000 jobs, $1.9 billion in reduced capital investment, or $1.1 billion in cost shifting to private plans with the decision not to expand Medicaid.  

Those cuts, which are included in the ACA and the Budget Control Act, combine to reduce Missouri hospital reimbursements by $4 billion through 2019. Another study from Mizzou found that Medicaid expansion would create more than 22,000 jobs.

Try to imagine the ripple effect of punching a $4 billion hole in the state's economy. It's not just hospital jobs. It's ancillary support jobs in healthcare and other businesses. It's less money spent in the supermarket in town, or the local café, or the hardware store, or the car dealership. It's money taken out of circulation that otherwise would have been spent locally.

So how will this all play out?  

"Hospitals will reduce some services, there will be jobs eliminated and the worst-case scenario is some hospitals are going to close," Zechman says. "They will be the only providers in those rural communities and generally speaking they are the No. 1 employer in those communities. From an economic perspective it is going to kill those local communities."  

Skeptics will point out that the MHA and Zechman have an interest in painting as bleak a picture as possible. That's a fair point. But what if we cut their estimates in half? See what happens when you take $2 billion out of the local economy. The effect is still daunting. Zechman calls the case for Medicaid "overwhelmingly compelling." He's right.  

"The state legislators don't want to listen to us because they think the CEOs have a vested interest in this thing. Yeah, we do have a vested interest because we are responsible for making this place work," Zechman says. "But the legislators will perk up when they start hearing from constituents that they have lost their job and/or they can't access services anymore. Then it will start resonating."

"It is highly politicized and that is what is so sad about it. It hurts the most vulnerable and the poor and at the end of the day that is where we'll end up," he says. "I personally lean to the right more than the left, but I am thinking 'my gosh,' sometimes at the end of the day you have to realize this is it. Let's go!' I have to put on my CEO hat and do what's best for the community."

Zechman says resistance to the Medicaid expansion will eventually crumble "but there will be blood on people's hands first."

"They are going to have to live with that," he says. "I am going to do everything I can to save peoples jobs and to save services but there will come a point when we are not going to be able to do that and I know that. I am not trying to blame anybody else. I take total responsibility for what I have to do here. But honestly, there is going to be blood out there before this thing caves and that will be the tragedy of this thing."