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Public hospitals fear ills of Medicaid cuts

By Karoun Demirjian

WASHINGTON—He may run the largest municipal hospital system in the country, but for New York’s Alan Aviles, the most important question being debated in Congress right now is how to fund the war in Iraq.

That’s because attached to the war spending bill is a proposal by Sen. Dick Durbin (D-Ill.) to delay new rules that would otherwise cut $4 billion from hospitals serving Medicaid recipients starting this fall.

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“That one regulation would cost our system about $350 million in lost funding annually,” said Aviles, president of the New York City Health and Hospitals Corp., echoing comments made by officials at the Cook County hospital system and elsewhere. “There is no way to absorb a cut of that magnitude without shutting down services.”

Combatants on all sides are preparing for a battle that resumes this week when the Senate returns from its spring recess, pitting drug companies against hospitals and Congress against the Bush administration. Nationwide, the proposed Medicaid cuts could affect more than 57 million Americans, hospital advocates say, Durbin as well as hospitals and health centers in as many as 42 states.

Buying time for hospitals

Durbin’s amendment, already approved by the Senate, would suspend for two years the authority of the Center for Medicare and Medicaid Services to impose the cuts. Absent the amendment, the cuts will take effect Sept. 1.

It is that deadline that prompted Durbin to seize on the war spending measure as a vehicle. “You need a bill that the president has to sign,” said Durbin, the Senate’s second-ranking Democrat. “It won’t get lost in a committee or never see the light.”

Durbin’s proposal would forbid CMS to make the cuts for two years, hoping to buy time for the hospitals. At the same time, it would provide the agency with more cash by increasing the rebate that drug companies must pay the government for drugs sold through Medicaid.

The move is being applauded by hospitals and states. But passage is far from guaranteed.

Its fate, rather, is entangled in the tug-of-war over legislation designating more than $100 billion for military operations in Iraq and Afghanistan. President Bush has criticized Democrats for attaching “too many conditions” and “too much pork” to the legislation, and he has threatened to veto it.

It passed by slim margins in the House and Senate, and Congress would almost certainly be unable to override a veto, so the Democrats and White House may be headed for a long showdown.

The administration says the Medicaid rule changes are necessary to prevent fraud and block states from improperly shifting costs onto the federal government. The changes would more rigorously define “public” hospitals—which are eligible for certain payments— and would impose a ceiling on certain benefits.

“States aren’t putting up their fair share of the financing of the program,” said Dennis Smith, director of state operations for CMS. “When you are drawing down federal dollars, we simply want to make sure someone is appropriately financing the state’s share.”

Some lawmakers, such as Sen. Charles Grassley (R-Iowa), oppose Durbin’s plan. “We should stop an amendment that gives CMS a two-year holiday from stopping fraud,” Grassley said recently on the Senate floor.

Medicaid is funded jointly by the federal and state governments, with poorer states receiving a larger federal contribution. The money goes not to individual patients but to the hospitals or clinics that care for them.

Hospital officials say the rule change would lead to drastic cuts.

“It would mean fewer hospitals being funded and fewer dollars going to those hospitals,” said Tom Nickels, a senior vice president of the American Hos- pital Association. “It puts states in a very difficult bind, because they never want to cut back on a service they’ve already agreed to provide.”

Across the country, administrators are being forced to look at ways to do just that—by cutting payments to patients, reducing Medicaid enrollment or trimming services, including those that do not serve just Medicaid recipients.

Much is at stake

For hospital administrators on a tight budget, it is an extremely worrisome task. Illinois public hospitals could lose $623 million annually, including as much as $235 million for the Cook County hospital system alone, state officials say.

In New York City, the public health system includes 11 hospitals, four nursing homes and more than 80 community-based health centers serving about 1.2 million people a year, a third of whom have no insurance. If the cuts go through, Aviles said, “we would be forced to dismantle very large parts of our system to keep things running.”

In Miami, the Jackson Health System stands to lose more than $130 million of its $1.9 billion annual budget.

According to CEO Marvin O’Quinn, roughly 45 percent of the system’s patient population is enrolled in Medicaid. The system’s flagship hospital, Jackson Memorial, provides $500 million worth of charity care and runs the only highest-level trauma, burn, spinal cord injury and neonatal care centers in Miami-Dade County.

“These programs don’t make a lot of money, but in our case we’re the only providers of those services,” O’Quinn said.

The problem is more acute in rural communities, where a greater percentage of the patient population is elderly or low-income and Medicaid dollars are often a hospital’s single largest source of revenue.

David Hayden, who runs the four health clinics and 25-bed critical access hospital that make up the Low Country Health Care System in South Carolina, said that if rural health centers are forced to shut it could be difficult to fill the gaps.

“In my particular situation, there’s usually somewhere in the neighborhood of 40 miles between us and the next significant group of primary care physicians,” Hayden said

Even supporters of Durbin’s amendment do not view it as a permanent solution. But it does buy health-care providers two years to adjust to the cuts, lobby Congress or even wait for a new administration with different health policies.

“Coverage of the uninsured has come back as a major issue in the ’08 presidential race, and we need to make sure this issue is part of those discussions,” Nickels said. “Regardless of the administration, regardless of the Congress, having the time to work on this is a benefit to us.”

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