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Wednesday, April 24, 2013

Lawmakers Should Not Delay Medicaid Expansion due to the President’s Proposal to Postpone Hospital Payments Cuts

Dee Mahan

Some lawmakers see the one-year delay in scheduled cuts to the Medicaid Disproportionate Share Hospital Program (DSH) in the President’s recently released budget proposal as a reason to delay the Medicaid expansion in their states. They claim that hospitals won’t be hurt if Medicaid isn’t expanded because DSH, which helps hospitals offset the cost of treating people who can’t afford to pay for their care, will still help hospitals continue to provide care to the uninsured.

But they’re wrong—not expanding Medicaid will not only hurt hospitals, it will hurt the uninsured as well.

The scheduled cuts to DSH were included in the Affordable Care Act because it was believed that, starting in 2014, more low-income people would get health coverage through the Medicaid expansion, and, as a result, hospitals wouldn’t need as much DSH support for unpaid care. However, last June’s Supreme Court decision made the Medicaid expansion an option for states. Hospitals in states that don’t expand Medicaid will still have considerable unpaid care, so the President’s budget tried to account for these continuing costs by delaying the DSH payment cuts.

While this delay in cuts would allow these hospitals to continue to be compensated for providing health care for the uninsured, lawmakers should not use this as a reason to avoid expanding Medicaid.

Here’s why:

First, this is a proposal. The President’s budget proposal to delay DSH payment cuts is just that—a proposal. It hasn’t been adopted. It isn’t law. Under what is the law right now, the DSH payment cuts will still start in 2014.

The President’s budget proposal will not be adopted as it is. The President’s budget proposal is one step in a process that requires negotiation between the President and members of Congress. In Congress, the House and Senate have both passed non-binding budget resolutions for 2014. However, there are vast differences between the House, the Senate, and the President’s budgets. A lot of negotiation is needed before a budget passes, so there is no guarantee that these cuts will be delayed in the final budget.

The Medicaid DSH cuts are only delayed for one year. Under the President’s proposal, the DSH payment cuts will still happen, they are just put off for a year. Come 2015, DSH payments will be cut. Not only that, but under the President’s proposal, to make up for the delay, the payment cuts scheduled for 2016 and 2017 would be larger.

States that delay expansion are losing full federal funding. From 2014 through 2016, the federal government will pay 100 percent of a state’s cost for expanding Medicaid. The federal share starts declining in 2017 until it reaches 90 percent in 2020. If a state doesn’t expand Medicaid until 2015, it loses a year of full federal funding. The President’s budget proposal did not change that.  

The Medicaid expansion does a lot more than help hospitals. There’s no question that expanding Medicaid will reduce the amount of unpaid care hospitals provide, and that will help hospitals’ bottom line. But it will do a lot more than that. It will allow states to reduce what they pay other programs to help low-income residents without health coverage. And, the added federal funds will stimulate state economies and create jobs.

Oh, and expanding Medicaid will mean that millions of Americans will have access to doctors, nurses, and hospitals—they’ll be able to get the health care they can’t afford now. That makes for healthier communities.

A proposal to delay cuts in hospital payments for a year is a foolish reason for states to reject millions in federal funding and the opportunity to provide health coverage to their lowest-income uninsured residents.