Hospital execs: Fees, not cuts, are best way to fund Medicaid

May 01--It's likely New Mexico now leads the country in yet another measure of distress: the percent of its population receiving health insurance under Medicaid.

Some 760,940 state residents -- 36 percent of the population -- are enlisted in the government insurance program. That's up from 25 percent at the end of 2014.

While the enrollment surge means far fewer state residents are going without health care coverage, New Mexico is facing an expected shortfall of about $85 million to fully fund its Medicaid program in the next fiscal year. The loss of those state Medicaid dollars will cost even more in forgone federal funds, leading to service cuts of an estimated $500 million.

To balance the increased health care needs with an expected decline in revenues, the state is proposing wide-ranging cuts in Medicaid reimbursements to physicians, hospitals, community providers and other services.

Hospital executives, however, are proposing an alternative solution that they say will ensure the program remains fully funded for years to come -- and the money would come from their own institutions. They're backing a new provider fee imposed on clinics, hospitals, nursing homes and diagnostic services such as radiology that would pump more money into direct care rather than cutting dollars. They see the fee as an investment that will allow the state to leverage more federal funds. But Gov. Susana Martinez, who has pledged that she won't increase taxes, has been slow to move forward with such a plan.

It may be unthinkable that business leaders would voluntarily step up to assess themselves a provider fee to support Medicaid services. But that what's happening all over the country. The vast majority of states now impose a range of fees that scoop up added federal dollars to support the growing Medicaid population.

"I think we're in an extraordinary circumstance now," said Patrick Carrier, chief executive officer of Christus St. Vincent Regional Medical Center, where 16 percent of revenues are from Medicaid billings. "You have a group who's willing to step up and contribute dollars to get the state out of a bind."

The groups are asking for agreements that the fee will be used exclusively for Medicaid and have a sunset date.

The surge in the Medicaid enrollment is a direct result of the Affordable Care Act, known as "Obamacare," which permits states that expanded eligibility rules for their programs to tap into a generous funding rate match from the federal government in an effort to move the nation toward universal health coverage. In the first years of the program expansion, the federal government covered the full costs of care for newly eligible patients. But the funding rate match for those patients is set to decrease to 90 percent by 2020, placing a heavier burden on states.

Martinez was one of just three Republican governors who initially embraced the expansion, and even her critics commend her for standing by the decision to extend Medicaid coverage to about 280,000 adults as the costs for their care have begun to rise.

Even though New Mexico's per-patient spending is about the same as the national average for Medicaid, the quickly growing enrollment here means the state's overall Medicaid spending is increasing faster than elsewhere -- and rising at more than twice the rate of state revenue, according to an analysis by the Pew Charitable Trusts' States' Fiscal Health Project.

And that's the problem for Martinez and policymakers. Because of a slowdown in the state economy from the decline in oil and gas production, Medicaid growth cannot be sustained without jeopardizing other programs, such as public education, public safety, the court system and economic development.

In the coming fiscal year, New Mexico is scheduled to spend $960 million on the program. With federal matching money, almost $5 billion would be spent on Medicaid in the state.

State spending on the program will continue to grow, especially during the next three years, as the federal match for the newly eligible drops to 90 percent. The average federal match for all other Medicaid patients is about 75 percent.

That federal money flowing into the pockets of hospitals, doctors, specialty clinics, caseworkers and counselors is one reason why many -- such as Carrier, of Christus St. Vincent, and the New Mexico Hospital Association -- are urging the governor to move forward with a new fee on hospitals, nursing homes and other providers rather than cutting Medicaid reimbursements, which likely would curtail some services.

In Arizona, such a measure was supported by former Republican Gov. Jan Brewer, who left office in January 2015. She saw the fee as a way to help pay for Medicaid expansion to some 300,000 low-income adults in her state.

"Arizona did exactly what we're talking about, and it has made a huge difference," said J.D. Bullington, a New Mexico lobbyist who represents Community Health System, a for-profit hospital company based in Tennessee that owns or manages hospitals in Las Vegas, N.M., Roswell, Deming, Hobbs, Carlsbad and Las Cruces. His client is supporting provider fees.

Bullington was the first to stand up at a meeting of state Medicaid officials and advocate for more revenue instead of more cuts.

"This program [Medicaid] is dramatically underfunded," Bullington said.

Carrier said hospital executives and others in New Mexico see the provider fee as a good investment, a chance to spend $1 of state money and leverage $4 or $5 more in health care services. And although he says the fee is a political issue, he sees it as revenue to cover the administration of a specific program, not a tax.

New Mexico already has imposed a fee on managed care organizations to help pay for Medicaid.

But most states go beyond that, imposing a fee on nursing homes, hospitals and even pharmacies, imaging centers, outpatient surgical businesses and rehabilitation centers. The only state without a tax or fee of any kind is Alaska.

Nursing facility taxes are the most common, with 41 states imposing them, while 39 states have a hospital fee, according to the Myers and Stauffer CPA firm, which has completed an analysis for the state of Alaska.

Colorado approved the first such law in 2009, and it brings in $1.2 billion a year. Connecticut expects to generate nearly $400 million by imposing a new tax on hospital net revenue and a fee for certain intermediate care facilities.

Idaho recently raised the fees it assesses on hospitals and nursing homes for three years. Alabama has a nursing facility surcharge. Maine, Nebraska, Ohio, Oregon, Rhode Island, Utah, Vermont, Virginia and West Virginia also raised hospital and health care taxes, according to the National Conference on State Legislatures.

Arizona's provider fee for Medicaid was challenged in court by those who argued that it was actually a tax and that all tax increases require a two-thirds vote of lawmakers. A judge in August 2015 sided with the state, saying the fees were a way to help a state agency pay for a benefit program, not a broader tax.

Brewer called the decision a victory for "business, our health care system and for hardworking families in Arizona."

Opponents, including the Goldwater Institute, the Phoenix, Ariz.-based libertarian public policy think tank, are appealing.

In New Mexico, it is unclear if a provider fee could be imposed without a vote of the Legislature.

Martinez has been reluctant to move ahead with such a measure without broad-based support from her own Republican Party. But some lawmakers say that there have been discussions and that Republicans who control the House of Representatives would consider such a fee if the state Human Services Department moved to cut spending as well.

The New Mexican made requests to agency spokesman Kyler Nerison for an interview on Medicaid, but he declined to make a Human Services administrator available.

After a March meeting of the state Medicaid Advisory Committee, which will consider final program cuts May 9, Human Services Department Secretary Brent Earnest said all options are on the table.

Another issue for New Mexico is how much provider cuts will further shrink the physician pool.

Some 87 percent of physicians in the state accept Medicaid patients, according to an annual survey of practitioners by the Physicians Foundation that was provided to The New Mexican by Merritt Hawkins, a leading consultant company for physician recruitment.

And only 6 percent of those physicians limit the number of Medicaid patients they treat, versus 20 percent nationwide, according to the survey.

The survey also found that New Mexico has fewer independent practitioners than the rest of the U.S. A larger percentage of doctors in this state are employed by hospitals and managed care organizations. That means doctors here are largely drawing a salary, and any direct Medicaid reimbursement cuts will be felt by groups such as Presbyterian Healthcare Services, Christus, Community Health and Lovelace.

Phillip Miller, vice president of communications at Dallas-based Merritt Hawkins, said these organizations and most primary care doctors in the state really don't have much choice but to accept Medicaid patients. If they refused Medicaid coverage, more patients would be sent to federally funded community health centers such as La Familia Medical Center, which is mandated to treat all patients regardless of their ability to pay.

If Medicaid compensation is compressed, overall provider recruitment could become a problem for New Mexico, the state with the oldest physician population in the country, surveys indicate. Some 33 percent of physicians in the state are at least 60. Eighteen percent of them plan to retire in the next three years, a percentage surpassed only by Idaho.

Contact Bruce Krasnow at [email protected].

If you go

What: Medicaid Advisory Committee meeting, where reimbursement cuts proposed by the Human Services Department will be open for public comment. Among the proposed cuts:

--2 percent reduction for services to the regular Medicaid population

--4 percent reduction in services for the newly enrolled ACA population

--5 percent reduction for hospital inpatient services, with a larger 8 percent cut at the University of New Mexico Hospital

--3 percent reduction to dental providers

--1 percent reduction to community health providers and agencies

When: 1 to 4 p.m. May 9

Where: Garrey Carruthers State Library, 1205 Camino Carlos Rey

State Medicaid spending for each person enrolled

1: Alaska: $9,474

26: New Mexico: $5,830

51: Nevada: $3,728

National average: $5,790

States with the highest percentage of population enrolled in Medicaid and CHIP, the Children's Health Insurance Program

New Mexico: 36 percent

New York: 32 percent

California: 31 percent

West Virginia: 30 percent

Vermont: 30 percent

___

(c)2016 The Santa Fe New Mexican (Santa Fe, N.M.)

Visit The Santa Fe New Mexican (Santa Fe, N.M.) at www.santafenewmexican.com

Distributed by Tribune Content Agency, LLC.