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Possible $500 million Medicaid cut draws protest By Michelle Martin Auxiliary Bishop Edwin Conway and Catholic health care officials
joined leaders from many Chicago-area health care institutions
at a press conference Sept. 21 to warn that thousands of poor
people could lose medical services because of a possible change
in federal Medicaid reimbursement rules. The change could cut $500 million a year from the amount the federal
government sends to Illinois, and local leaders fear that it will
be formally proposed any day. The change would primarily affect hospitals and other facilities
that serve a disproportionate number of patients on Medicaid and
without any insurance, including Cook County Hospital and several
Chicago Catholic hospitals. “The Catholic Church has a long and proud tradition of delivering
health services, especially in poor and working class areas of
our community,” said Bishop Conway, the archdiocese’s liaison
for health affairs. If the Health Care Financing Administration
changes the rules, hospitals in poor areas might have to cut services
or close, he said. “Low-income patients could no longer be served. Whole communities
would be left without medical services,” he said. “We ask that
HCFA not proceed without considering the effect on low-income
people in underserved areas.” Mercy Sister Sheila Lyne, the city health commissioner, said service
cuts or closures at private, not-for-profit hospitals could create
a flood of new demands on Cook County Hospital, which would also
lose millions of dollars. “Our primary concern is the broader health care impact,” Lyne
said. “Cutbacks would be severe, and thousands of people would
turn to County (Hospital) and city public health clinics. The
survival of the entire inner-city health system could be in jeopardy.” The officials begged local residents to write or e-mail the White
House, asking President Clinton to stop the HCFA from changing
the rules, and to contact their congressional representatives. The rule change would essentially stop Illinois and 18 other states
from taking advantage of a loophole in the Medicaid reimbursement
regulations that allows the state to get more matching funds than
it would otherwise be entitled to by counting municipal and other
health care spending as state expenditures. The state has been taking advantage of the system for about 10
years, and had always used the federal money to pay for medical
care for poor and underserved people, said Timothy O’Brien, an
attorney who represents several Chicago hospitals. “This is not
illegal,” he said. “This has been reviewed more than 22 times.
This is a technical rule change, but these aren’t technical people
being served. They are real people.” The changes could threaten everything from neonatal intensive
care units on the South and West sides to trauma centers and major
teaching hospitals. Children’s Memorial Hospital alone could lose
more than $28 million a year, said Susan Hayes Gordon, the hospital’s
chief public policy officer. “There’s nowhere to make that much money up,” she said. “We would
have to reexamine our mission of being an open-door hospital for
all comers.” The possible change arose after an investigation by the Department
of Health and Human Services Inspector General found that some
states put the federal matching money into general revenue funds,
where it could be used for non-medical costs. And, in any case,
the states that have taken advantage of the system are unfairly
getting more funding than others, according to the testimony of
Michael F. Mangano, the department’s principal deputy inspector
general, at a Sept. 6 Senate Finance Committee hearing. “In our opinion, the mechanisms were unfairly designed solely
to generate excessive federal Medicaid reimbursements and effectively
evade the statutory federal/state Medicaid matching requirements,”
Mangano said. Timothy Westmoreland, the Health Care Financing Administration’s
director of the Center for Medicaid and State Operations, said
the added costs are driving up the federal Medicaid bill even
as the number of people served by the program shrinks. “Some states are using these matching funds for worthy purposes,
such as supporting public hospitals and other health care programs,”
Westmoreland said at the Sept. 6 hearing. “While these other programs
are laudable, some are not eligible for federal Medicaid funding.
… Existing regulations never anticipated these abuses.” Westmoreland estimated that the practice would cost the federal
government $2 billion this year, and more in subsequent years,
as more states take advantage of the loophole if it is not closed. While no new rule has formally been proposed, Westmoreland told
committee members that any new rules would be implemented over
a period of years, and no state currently taking advantage of
the system would be affected next year. Also, he said, new rules
would take into account higher costs faced by public hospitals
like Cook County. That doesn’t satisfy Mercy Sister Lenore Mulvihill, chair of the
board of Mercy Hospital and Medical Center. Mercy could lose up
to $6.8 million of the $50 million that Catholic hospitals in
Illinois would stand to lose. “Because much of the effort nationally has been focused on the
impact on public hospitals, it appears that the executive branch
and our legislators do not understand how devastating the impact
of this rule change will be on the uncompensated care in Illinois
and other states,” said a letter Mulvihill distributed to board
members. Because no new rules have been proposed and nobody knows how much
of the lost funding could be made up by the state, health care
officials said it is too early to say exactly what the effect
would be, beyond that they would be serious. “In a best-case scenario, the hospitals will be able to cut services
and stay afloat,” said Philip Karst of the Illinois Catholic Health
Care Association. “In a worst-care scenario, some of them will
close.”
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