Georgia’s faltering Medicaid program received a massive financial bandage Wednesday when Gov. Nathan Deal signed a measure into law to avert a roughly $700 million hole in the state’s health care budget.
But the funding generated through the measure — which clears the way for renewal of a fee on hospitals — is not nearly enough to cover the health care needs of Georgia’s growing population over the next two years. The state’s community health agency and Georgia’s Medicaid program are still short hundreds of millions of dollars, and there’s no solution in sight. For now, that means growing health care costs will continue to be passed on to consumers as hospitals try to make up for money lost caring for the uninsured by hiking up prices for those patients who can pay.
“For the time being, this will fill the hole that we see right now,” Deal said after signing the bill before hundreds of health care executives at the Georgia Hospital Association’s annual meeting. “Obviously there are still some real unanswered questions at the federal level, and what those answers might be and how they impact the state’s budget, we don’t know right now.”
The measure, Senate Bill 24, helps guarantee a stream of funding for the next four years for Medicaid, the government’s health care program for the poor. The so-called “bed tax” requires hospitals to pay 1.45 percent of their net patient revenue. The state then uses that money to draw roughly $450 million in federal matching dollars. Without the fee, hospitals would face Medicaid reimbursement cuts of 20 percent or more.
Anti-tax groups in Georgia and beyond have criticized the move, which was seen by some as an early Valentine’s Day gift to lawmakers who were eager to avoid a vote on extending what some saw as a tax. Instead, the bill transfers the power to levy the fee from lawmakers to the state Department of Community Health.
“It is at least, for the time being, the best answer for being able to close that almost $700 million hole in our Medicaid program,” Deal said. “We have every reason to believe it will work smoothly and efficiently.”
The measure swept through the Legislature with startling speed. Hospital officials say the quick passage was key to avoiding a damaging financial blow to hospitals, and they said a delay would have led many hospitals to drastically cut services and force some small rural health systems to shut down.
Several national conservative groups derided the move, including Grover Norquist’s Americans for Tax Reform, which called it a “step in the wrong direction.” But local tea party leaders, wary of being painted as the reason hospitals were forced to shutter, didn’t muster a spirited opposition.
“It’s not a good idea, but it’s something we’re staying out of. It’s a lose-lose. If we opposed and the hospitals closed, we’d be blamed,” said Debbie Dooley, a co-founder of the Atlanta Tea Party. “You can’t fight every battle. But if this starts happening with other legislation, you’ll start seeing us step up.”
Although the loss of $700 million in funding has been avoided, the state’s Medicaid woes are far from over. The program is still facing a nearly $390 million budget hole even with plans by the Department of Community Health to trim tens of millions of dollars. Medicaid enrollment, which already provides care for 1.7 million low-income residents, continues to swell as the economy continues to struggle and Georgia’s population grows. And President Barack Obama’s health care overhaul brings with it new costs and penalties, many of which remain unknown.
Already, some hospital executives worry that the Department of Community Health’s proposal to cut Medicaid reimbursements by 0.74 percent for many providers could lead some physicians to limit the number of low-income patients they’ll see — or stop accepting them altogether.
“Some have said enough is enough,” said David Tatum, vice president of government affairs for Children’s Healthcare of Atlanta.
Meanwhile, safety net hospitals are bracing for drastic cuts in federal funding that could jeopardize their ability to provide critical care for tens of thousands of uninsured and poor Georgians.
Starting in 2014, the federal government plans to cut in half over five years an $11 billion program that helps at least partially cover the cost of caring for uninsured patients. The loss was supposed to be offset by the expansion of Medicaid that would ensure millions more people would have health coverage.
But the governor has said Georgia can’t afford to expand Medicaid as it currently operates. He and many other Republican governors have questioned whether the federal government will be able to hold up its end of the bargain — covering 100 percent of the cost of the expansion for the first three years and at least 90 percent thereafter.
The expansion would cost the state an estimated $4.5 billion over 10 years on top of the financial challenges Medicaid already faces, said Christopher Schrimpf, a spokesman for the Department of Community Health.
“As the governor has said,” Schrimpf said, “even with the federal government buying lunch, we still can’t afford the tip.”
About one in five Georgia residents don’t have health coverage. Hospitals make up for the lost revenue by increasing prices for patients who can pay. The result: higher insurance premiums for companies and their workers.
Advocates for an expansion, however, say that expanding the program would not only provide health coverage to the uninsured but also give the state’s economy a much-needed boost.
Expanding Medicaid would create an estimated 70,000 new jobs in Georgia and have an economic impact statewide of $8 billion a year, according to a new study conducted by Georgia State University professor Bill Custer, one of the state’s leading health care economists. An expansion would also produce roughly $276 million in new state and local tax revenue annually, the study shows. The report released this week was commissioned by the Healthcare Georgia Foundation, which focuses on expanding access to quality health care for underserved Georgians.
For hospitals in states that have opted not to expand Medicaid, including Georgia, the loss of federal dollars could be catastrophic. Grady Memorial Hospital would lose an estimated $45 million in federal funding if Medicaid isn’t expanded and an alternative solution isn’t found.
The sprawling downtown Atlanta hospital would be forced to cut clinical services, Grady CEO John Haupert said. And as many as a dozen rural hospitals could be shuttered if the federal dollars dry up, he said.
“That issue is being used as a political volleyball,” Haupert said. “It’ll come down to the bitter end before it gets resolved.”
How the ‘bed tax’ works
The state charges hospitals 1.45 percent of net patient revenue to help pay for Medicaid. Trauma centers pay 1.40 percent. That money enables the state to draw federal matching dollars. Dollars are redistributed to hospitals based on Medicaid services they provide. Hospitals that care for a lot of Medicaid patients can get back more than they pay, while those that don’t may have a net loss on the tax. The “bed tax” was first established in 2010.
‘Bed tax’ winners and losers
Hospitals that netted the most (fiscal 2011)
Provider/Paid in/Got back/Difference
Children’s Healthcare Egleston/$4,903,332/$18,720,748.16/$13,817,416.16
Grady Memorial Hospital/$4,408,285/$14,254,713.13/$9,846,428.13
Children’s Healthcare Scottish Rite/$4,809,355/$13,759,328.19/$8,949,973.19
DeKalb Medical Center/$3,305,478/$6,134,394.90/$2,828,916.90
The Medical Center (Columbus)/$2,537,074/$4,623,697.07/$2,086,623.07
Hospitals that lost the most
St. Joseph’s Atlanta/$4,563,855/$961,508.23/-$3,602,346.77
Emory University Hospital/$8,507,035/$5,111,089.88/-$3,395,945.12