The good news for healthcare providers is that the $787 billion stimulus bill that President Barack Obama signed into law yesterday includes an additional $87 billion for state Medicaid programs. Given Medicaid's dismal reimbursements, however, that's also the bad news.
"It's mostly short-term good news for the hospitals, health systems, and physicians because it does hold the promise of broadening coverage, at least temporarily, in a broad environment," says Steve Jenkins, a vice president at Chicago-based healthcare consultants Sg2. "We do need some caution about the primary method of expansion being Medicaid. That has some risks. Payment levels are the poorest of any payer and don't cover costs. And because Medicaid is so tied to state budgets, it's very susceptible to the swings of state budget fortunes. It expands when state budgets are flush, and it contracts when state budgets are in crises, as many are today."
In fact, the Medicaid supplemental funding does have one very large string attached. States can only use the supplemental money if they do not cut their Medicaid programs. The National Conference of State Legislatures reports that 43 states face budget shortfalls this year, and AARP reports that several states have considered cutting their Medicaid expenditures this year to account for budget shortfalls.
Expanding healthcare coverage is clearly the largest priority of the stimulus plan's approximately $150 billion in dedicated healthcare expenditures. The Medicaid supplemental funding and $19 billion earmarked to pay up to 65% of COBRA premiums for laid-off workers are the top two biggest expenditures and comprise more than two-thirds of targeted healthcare spending. "Today, 15% or fewer of people who have the COBRA option elect it because it's not affordable to a lot of people who've lost their jobs," Jenkins says. "Now they are going to have a better opportunity to sustain their coverage. And it's a good thing for healthcare providers because it's going to maintain them at a group-based policy that is more likely to have reasonable reimbursement rates."
The third-largest healthcare-related expenditure in the stimulus is the $19 billion dedicated to provider healthcare information technology upgrades, of which $17 billion will be awarded through Medicare/Medicaid and $2 billion through grants and loans. Stephen Page, an attorney and analyst with Nashville-based Waller Lansden, says that amounts to a base of about $2 million for each hospital that qualifies as a "meaningful EHR user," under a rather dry and detailed federal definition.
Physicians have long lagged behind hospitals in the adoption of information technology; Page says that less than 5% of doctors use EHR. However, doctors could receive as much as $18,000 in incentives for the first year that they become a "meaningful EHR user," under a timetable that encourages quick adoption of the technology and financial penalties for those who lag behind. The incentive payments do not apply to hospital-based physicians who have access to the technology through their health system.
Page says the Obama administration's EHR incentives may be the carrot that eventually leads to a big stick: mandatory EHR for physicians seeking Medicare/Medicaid reimbursements. "If in five years you don't have EHR you could probably be seeing this kind of thing," he says.
One of the smaller expenditures in the massive healthcare stimulus package may prove to be the most contentious. The Obama administration has earmarked $1.1 billion—which is pocket change relative to the overall size of the stimulus—to compile data on evidence-based medicine.
The government wants to know which surgical procedures, drugs, medical devices and treatments work and which don't. Peter Orszag, director of the federal Office of Management and Budget, suggested recently that the government could adopt a system of financial rewards and disincentives for physicians and hospitals that use proven treatments. "More research on what works and what doesn't, tied to financial incentives to provide the higher-value care, could help to reduce costs without harming quality," Orszag said on National Public Radio. "We currently have a set of financial incentives just for more care. And we need a set of financial incentives for better care. And part of that requires knowing what better care is."
Evidence-based medicine is also aggressively supported by the health insurance industry. "The investment in comparative effectiveness will yield vital information on the safety and effectiveness of medical treatments and technologies, empowering patients and doctors to make better-informed healthcare decisions," says Karen Ignagni, president and CEO of America's Health Insurance Plans.
That enthusiasm from the government and the health insurance industry has doctors uneasy. Many doctors see evidence-based medicine as the government's and private carriers' first big step toward dictating treatment. Drug and medical device companies don't like it either. They're afraid that their more profitable products might be either exposed as ineffective or too costly.
"At some point I would imagine the government is going to try to figure out what is the best treatment," Page says. "Then the question is, are they going to tell doctors you treat this way or that way and you only reimburse them if they follow certain protocols. That is down the road, but if you read between the lines, is this where it's going?"
Obama administration officials have made it clear that the stimulus plan is the first major step in the president's plan to overhaul healthcare delivery. "This represents the beginning steps of the president's health reform vision," Jenny Backus, a spokeswoman for the Health and Human Services Department, told the Associated Press. "It's designed to get relief to people who need it most and to do everything we can to bring down the cost of healthcare, and improve access and quality."
Although it may be tempting to take every last nickel the feds are offering, Jenkins warns anyone taking stimulus money to read the fine print. "There are a lot of devils in the details about how the money is spent and how the different measures get implemented," he says. "Anyone doing business with the federal government needs to watch their Ps and Qs and exert all due diligence. If you can get passed that, my general advice is look for how this stimulus bill can work for you, and look for where there are initiatives you are pursuing where this new fund can support what you are doing."
John Commins is the human resources and community and rural hospitals editor with HealthLeaders Media. He can be reached at jcommins@healthleadersmedia.com.