Senate Majority Leader Harry Reid (D-NV) (Credit: AP)

Senators Ben Nelson (D-NE) and Joe Lieberman (I-CT) voted with all Senate Republicans to block the $120 billion bill.  The measure failed having only received 56 “aye” votes.

Of key concern for hospitals is the enhanced Medicaid funding in the bill that would extend the increased federal share of Medicaid dollars for states.  Iowa’s state budget currently relies on nearly $150 million that would cease to exist should the Senate not pass this legislation.

In addition the bill contains an temporary patch for physician Medicare payments that are currently in limbo.  A flawed payment mechanism in the Medicare program causes physicians to face huge annual cuts that, until now, had been prevented by Congress.  Physician Medicare claims have been held by the Centers for Medicare & Medicaid Services for the past week and will likely have to be held longer.

IHA supports this legislation and urges the Senate to take final action to ensure appropriate funding for state budgets and fix the physician payment cuts.

This was not an easy decision for EMH leaders to make.  Only a handful of mental health programs like these exist in Iowa and the services at EMH are heavily used by patients from all over the state.  In fact, only 15 percent of the hospital’s inpatient behavioral health patients come from Hardin County.  This is no surprise; after all, 83 of Iowa’s 99 counties are considered mental health professional shortage areas.  With only about seven practicing psychiatrists for every 100,000 residents, Iowa ranks 47^th in the nation for access to mental health care. 

In Iowa Falls, EMH has done all it could to keep its inpatient program functioning.  The hospital streamlined the program, reduced staff and discontinued its transportation program.  But because of lagging reimbursement, particularly from Medicare and Medicaid, the program has been a drain on overall hospital finances.  This is a problem for all Iowa hospitals offering behavioral health services, but the impact is much greater for small facilities like EMH, which do not have the patient volume to make up for the losses.  This is why only a handful of these small hospitals offer any kind of behavioral health program (inpatient or outpatient). 

The good news for people in and around centrally located Hardin County is that inpatient behavioral health services in Des Moines and Waterloo are relatively close by.  For much of the rest of Iowa, particularly in the western half of the state, the distances are much greater.

What needs to be done?  IHA is advocating for programs that would attract more psychiatrists to the state, such as student loan repayment programs.  Expanding telemedicine services through high-speed Internet would allow more patients to utilitize online counseling rather than having to travel to urban areas where behavioral health programs and practitioners are concentrated.  IHA has been steadfast in pushing to keep the state’s mental health institutes in Cherokee, Clarinda, Independence and Mount Pleasant open – Iowa needs more access to mental health services, not less. 

IHA also continuously advocates for increasing Medicare and Medicaid payments to hospitals and doctors.  Hospitals lose millions of dollars each year because these programs do not cover the full cost of care.

In fact, what Iowa hospitals are proposing is not a “tax” at all. It is a voluntary assessment for a limited three-year period that enables the Iowa Medicaid program to draw down millions of federal dollars to help provide health care services for our poorest citizens.

The proposal is similar to ones that already exist in more than 20 states. Medicaid is a state/federal partnership program. Generally speaking in Iowa, whenever the state invests $1 in Medicaid, the federal government matches that dollar with approximately $2 of federal money. The trouble is that the current Iowa budget environment means the state doesn’t have enough money to invest fully in the program. Under the proposal being considered, hospitals would voluntarily assess themselves $40 million to act as the state portion for the Medicaid match. That results in the state getting a total of more than $130 million in total Medicaid funds…without Iowa taxpayers footing the bill.

Iowa then increases hospital Medicaid payments to the federal limit to return money to Iowa hospitals. This means hospitals would see roughly $68 million in increased Medicaid payments; but remember hospitals originally invested $40 million into the plan, so the net gain for the industry is $28 million. And in fact, the way the proposal is structured, not every hospital will see a net financial gain under this plan. However, the overall dollars returned to hospitals will help protect the more than 70,000 hospital jobs in Iowa that would be at risk if the state were forced to reduce hospital Medicaid payments as part of overall budget cuts. The remaining $65 million goes to Iowa’s Medicaid program and allows Iowa government to cut more than $20 million from its expected state share of Medicaid needs.

This proposal is a “win-win-win” for hospital employees, the patients they serve, and Iowa state government.

For more information about the plan proposed by the Iowa Hospital Association, click here. Also, feel free to leave your comments about how you think Iowa hospitals are proactively trying to protect Iowa’s overall Medicaid program.

Uncompensated Care Provided by Iowa Hospitals

Information released this week by the American Hospital Association (AHA) shows how the worsening economy has taken a toll on U.S. hospitals. 

According to AHA, U.S. hospitals provided $36.4 billion in uncompensated care in 2008, a $2.4 billion increase over 2007.  Uncompensated care is the combination of bad debt (money hospitals expected to receive for care provided but did not) and charity care (money not expected to be received from patients who met the hospital’s guidelines for free care). 

In Iowa hospitals, uncompensated care totaled $709 million in 2008, up from $613 million in 2007. 

Meanwhile, underpayment by Medicare and Medicaid to U.S. hospitals reached $32.4 billion in 2008, up from $31.9 billion in 2007 and $3.8 billion in 2000, respectively.  Medicare reimbursed 91 cents and Medicaid reimbursed 89 cents for every dollar hospitals spent caring for these patients.  In Iowa during 2008, Medicaid losses totaled nearly $178 million, while Medicare losses amounted to $103 million. 

The poor economy and the rising cost of insurance have led to more people becoming uninsured.  Research has shown that for every one percentage point increase in unemployment, 2.5 million people lose their employer-sponsored insurance.  More uninsured people means more spending by hospitals to pay for care for people who cannot pay for it themselves. 

Some of the uninsured qualify for government assistance to pay their medical bills, often through the Medicaid program.  But Medicaid doesn’t pay hospitals for the full cost of care (neither does Medicare, but Medicaid pays even less) and hospitals must cover the difference.  With more people going on Medicaid, that difference is growing larger. 

How does this impact hospitals?  Well, for one thing, the growing demand for charity care and more instances of bad debt makes it harder for hospitals to pay better salaries (it’s well known that Iowa nurses salaries are among the lowest in the nation) that help keep medical professionals (particularly young ones) in the state.  It also makes it harder for hospitals to build reserves that pay for replacing aging equipment and improving services. 

But uncompensated care and underpayment by Medicaid and Medicare also impact individual Iowans, because these costs are shifted to payers who do cover their full cost of care – mainly people who are privately insured.  In Iowa, Wellmark has estimated that 10-15 percent of the dollars it pays to Iowa hospitals and physicians is to compensate for government programs’ shortfall. 

Uncompensated care and underpayment by Medicaid and Medicare are always a challenge for hospitals.  This is why IHA supports efforts to insure more Iowans and more Americans and why IHA has fought to keep the government from cutting Medicare and Medicaid payments.

Two-thirds of the new proposed spending cuts come from hospital payments.  The President proposed $106 billion in ‘savings’ by cutting the Medicare and Medicaid DSH programs by 75 percent.  In addition, the President proposed $110 billion in ‘savings’ by reducing inflationary updates with an annual ‘productivity adjustment,’ the greatest impact on hospitals.

These ‘savings’ are in addition to the President’s FY2010 budget proposal to cut Medicare and Medicaid spending by $309 billion. They are also in addition to the $38 billion in previously announced reform-related cuts, and $41 billion in cuts in the proposed FY 2010 inpatient PPS rule.

IHA will be analyzing the proposal’s specifics and determining as best possible the Iowa impact. IHA will also be coordinating our messages and advocacy strategy with AHA.  Please stay tuned for next action steps on this important issue.