Doctors, hospitals fear Medicaid cuts

Aug. 07--A $156 million cut to Medicaid passed by the Alabama House this week, if it becomes law, could mean devastating and lasting changes to the state's health care infrastructure, according to experts.

"There's an economic dimension to this that people have not quite grasped," said Jim Carnes, policy director for Alabama Arise, which advocates for the state's poor. "This would affect all Alabamians because it undercuts the entire health care infrastructure of the state."

Medicaid is the infrastructure on which Alabama's health care system is built, he said.

According to Medicaid's fiscal year 2012 annual report, about 1.1 million or 23 percent of Alabama residents -- including nearly half the state's children -- were eligible for Medicaid at some point during the year. More than half of the babies born in the state were born under Medicaid insurance and two-thirds of the state's nursing home residents rely on Medicaid to cover the cost of their care, the report states.

Because Medicaid is so pervasive, everyone will be affected by the cuts if they become part of the budget, and it won't take long after the new fiscal year begins in October for those effects to become evident, Carnes said.

Rosemary Blackmon, executive vice president of the Alabama Hospital Association, agreed.

The $156 million cut will be multiplied because the state only pays for a portion of the Medicaid patient's care. For every 32 cents Alabama spends on Medicaid, the federal government spends 68 cents, she said. That means the cuts would have an impact of more than $450 million.

"You would see some hospitals being under tremendous financial strain," Blackmon said.

In the association's last survey of hospital profit margins in December 2013, 41 percent of all hospitals and 45 percent of rural hospitals had a negative margin, she said.

"If you're already operating in the red, any decrease in patient revenue is devastating," Blackmon said.

The end result could include health care providers and pharmacies leaving Alabama, a reduction in available services, layoffs and the potential for hospital closures.

"If hospitals can't afford to provide care for one population, they may not be there for the rest," she said.

Stringfellow Memorial Hospital Chief Financial Officer Craig Fichter said by email that the hospital provided more than $30 million in uncompensated care in 2014. He declined to say what percentage of the hospital's clients are on Medicaid, however Fichter did say the cuts could hurt.

"Proposed cuts by the Legislature coupled with the state's earlier decision not to expand Medicaid as part of the Affordable Care Act could have a devastating impact on access to care," Fichter wrote. "Alabama hospitals will be challenged to respond to increasing amounts of uncompensated care resulting from this decision, which could impact their ability to provide essential health services."

In addition, there is a danger that the cuts could put the state out of compliance with Medicaid's requirements and the whole Medicaid system could collapse, Blackmon said.

Anniston physician Dr. Carla Thomas said for doctors the cuts will probably manifest as delayed or smaller payments for work with Medicaid patients and a larger population of indigent patients. For patients with private insurance or who pay for their own care, that could mean rising medical costs.

It would be up to local doctors to decide how to deal with the cuts, whether it be by seeing fewer Medicaid patients, moving or raising prices, Thomas said.

She added that if doctors do decide to move out of state, they may not return. It's expensive to reopen because of the cost of mandatory electronic health records.

"If you shut down an office, it's not easy to open by just hanging a shingle," Thomas said.

Electronic health records have made insurance claims complicated and time-consuming, Thomas said. She used to do her insurance on the weekends; now she has to hire an outside clearinghouse to handle the complicated claim process, Thomas said.

"Once you make cuts of this nature and lose that infrastructure," Blackmon said, "it's very difficult to get back."

In addition to the medical consequences, the cuts could hurt communities economically, Blackmon said.

Hospitals are often some of the largest employers in the community in which they reside, she said.

So it is in Anniston, where Regional Medical Center is one of the employs about 1,600 people. If the hospital lays off employees or closes in response to the cuts, that would create a further strain on the community, Blackmon said. Attempts to reach RMC officials Thursday were unsuccessful.

Rep. Steve Clouse, a Montgomery Republican who chairs the committee that gave the budget its first OK, proposed the Medicaid cuts after the failure of a cigarette tax increase. He said Wednesday the budget should encourage discussion in the Senate. Rep. K.L. Brown, R-Jacksonville, said he thought the cuts would encourage Medicaid reform. Carnes said he was confused by that tactic.

Carnes said Arise and many doctors have worked with the Legislature on Medicaid reforms that have not yet been put in place but should help reduce the increasing Medicaid burden on the state. The reforms were approved by the Legislature two years ago and are now being reviewed at the federal level, Carnes said.

"It seems kind of baffling that the Legislature would turn its back on the reform plan," he said.

The state Senate is scheduled to debate the House budget on Friday.

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