Rochester Business Journal - February 7, 2020
Pending Changes to Medicaid Threaten Upstate Hospitals' Viability
Businesses look for and rely on a secure community and thriving workforce to fuel innovation, growth, and success. A key component of any vibrant community is access to high-quality health care and the knowledge that the local hospital is there in times of illness, health emergency or accident.
We will learn in seven weeks whether hospitals, the cornerstones of New York communities, will be put in further financial peril as the state decides whether to cut hospital Medicaid payments to close a $4 billion budget deficit.
Rather than make a directive, Gov. Andrew Cuomo has appointed a work group, the Medicaid Redesign Team (MRT), to find $2.5 billion in Medicaid savings in state fiscal year 2021 by April 1, 2020. Community awareness about this twist in the budget process and the serious negative impact the outcome of this process could have on communities in the greater Rochester area is important.
Hospitals in the greater Rochester region cannot shoulder additional Medicaid cuts and Upstate hospitals would be disproportionately impacted by such cuts. Consider the following:
- Medicaid chronically pays much less than what it costs to render care – 69 cents on the dollar for Upstate hospitals.
- Nearly 85% of Upstate hospitals are operating with negative margins.
- Upstate hospitals provide care in rural, low-population and remote areas and deal with higher physician and workforce shortages than downstate, NY.
- Moreover, and significantly, a 1% Medicaid cut was already implemented on January 1st, meaning almost $500 million less per year going forward.
Hospitals in this region are the largest economic drivers and ultimate anchors in our communities:
- Hospitals and health systems provide 62,000 jobs and generate $9 billion annually in economic activity.
- In addition to essential, high-quality health care, they provide social services that advance quality of life and wellness.
- Teaching hospitals provide tertiary care and research for our citizens battling serious illness. They train tomorrow’s doctors in an effort to retain new physicians in the region.
The Governor used the same process - an MRT - in 2011 to tackle a similarly daunting Medicaid deficit. MRT I developed several positive Medicaid reforms but, to keep spending in check, instituted a 2 percent annual Medicaid Global Cap on spending growth.
The cap is adjusted for inflation annually by using a nation medical price index. This index does not recognize New York’s aging population, extensive regulatory environment, increasing wages for hospitals’ valued workforce, and other factors unique to this state and, therefore, has not kept pace with New York hospital costs.
More significantly, that cap does not adjust for enrollment – from four million New Yorkers in 2011 to six million enrolled today – nor utilization increases brought about by an aging population, the opioid crisis, program changes, etc.
The net effect is that, despite extensive and very successful efforts to become more efficient and decrease operational costs, hospitals have gone a decade with no Medicaid rate increases and costs further outpace Medicaid payments.
Solid Solutions, NOT Hospital Cuts
We urge MRT members, the Governor and NY legislature to adopt the following solutions that would address the Medicaid deficit without harming Rochester-area hospitals’ ability to provide all services needed by our patients.
Revisit the Medicaid Global Cap
The Medicaid budget deficit results when actual spending exceeds that which is allowed under the Medicaid Global Cap, developed by MRT I a decade ago. Is a 2 percent cap appropriate and adequate 10 years later given the legitimate growth in enrollment, utilization and costs? A realistic cap would prevent frightening and unrealistic budget holes from popping up in the New York budget that must be filled to the detriment of Medicaid beneficiaries.
Focus on True Drivers of Growth
The Governor and analysts have identified the biggest driver in Medicaid cost growth: Managed Long-Term Care has grown 301%, or an astounding $4.8 billion, since 2013. Only 5 percent of New York’s six million Medicaid beneficiaries are enrolled in MLTC, yet they account for fully one-third of all state Medicaid spending, according to the state Division of Budget.
Through MLTC, health plans manage and provide long-term care service for chronically ill and disabled enrollees in their homes. Enrollment in MLTC for Medicaid over-65 population (also eligible for Medicare so called dual eligible) was mandated in 2012.
A sister program within the MLTC drove much of the spending growth. The Consumer Directed Personal Assistance Program allows the elderly/disabled to choose their own in-home caregivers, including friends and family members. From 2017-2018, spending through CDPAP grew from $1.3 billion to $2.4 billion.
While a good idea – allowing beneficiaries to receive care and stay in their homes – some argue these programs are susceptible to fraud and mismanagement. In fact, two MLTC plans already have settled with the government for illegal billing.
Any solution must include re-examination of MLTC including administration, oversight and eligibility. Not just to avoid unnecessary cuts to other providers, but to ensure elderly and disabled New Yorkers are receiving the care they need.
“New-Found” Revenue
Finally, any new revenue that comes to the state from any source should be directed to the Medicaid program, whether from settlements (opioid, etc.), re-estimated revenues, rainy-day funds or other avenues. New money should be directed to providing essential Medicaid services to our must vulnerable citizens.
Pandion wants to ensure concerns of those living in the Rochester area, Finger Lakes and Southern Tier will be heard and adequately considered to protect access to all the essential health care services our citizens need.
Travis Heider
President and CEO
Pandion Healthcare: Education & Advocacy
Travis Heider is president and CEO of Pandion Healthcare: Education and Advocacy, a not-for-profit 501(c)3 association whose membership comprises 17 hospitals and their related health systems in the nine counties of Monroe, Livingston, Ontario, Wayne, Seneca, Yates, Allegany, Steuben and Chemung. The association works closely with the Iroquois Healthcare Alliance as part of Upstate New York Healthcare Coalition, the Healthcare Association of New York State (HANYS), and the American Hospital Association (AHA) collaborating on many issues and activities.