The Glade 4.0

Hospitals in states opting out of Medicaid expansion fear planned cuts
Stephanie Armour

15 May 2013
Copyright 2013, The Washington Post Co. All Rights Reserved


With 15 states opting out of President Obama's Medicaid expansion, hospitals that treat poor and uninsured patients are asking the government to delay $64 billion in planned funding cuts.

Medicaid funds to hospitals with a disproportionate share of low-income patients will be cut 50 percent, or $14.1 billion, from fiscal 2014 through 2019, according to draft regulations to be published in the Federal Register on Wednesday.

The American Hospital Association wants to delay by two years the start of the cuts to Medicaid and $49.9 billion in reductions to Medicare, the health program for the elderly and disabled.

"They decided not to look at the effect of health-care reform," Tom Nickels, senior vice president for federal relations in Washington for the hospital association, said in a telephone interview Tuesday. "They don't penalize states that have chosen not to expand."

The reductions are mandated by Obama's Affordable Care Act and were supposed to be offset by an increase in the number of patients who would gain insurance through an expansion of state Medicaid programs. With some Republican-led states deciding not to cooperate, a loss of funding without a gain in more insured patients would hamper hospitals' ability to keep caring for underserved populations.

"It's a kick in the gut," said John Bluford, chief executive of Truman Medical Centers in Kansas City, Mo., which estimates it may lose as much as $150 million in Medicaid payments over seven years. "These are real dollars. It would wipe out our margins."

The rules being circulated this week show Medicaid would reduce the "DSH" payments by $500 million in the fiscal 2014 year starting in October. For 2015, $600 million more would be cut, with the annual reductions reaching $5.6 billion in 2019.

For the first two years, the funding cuts won't be based on whether states have opted to expand Medicaid. Tenet Healthcare, the third-largest for-profit hospital chain in the United States, estimated in February the Medicaid and Medicare cuts would cost it $35 million in government payments in the fourth quarter.

Dallas-based Tenet has 26 percent of its beds in Florida and 20 percent in Texas, both states where the Republican governors have opted not to expand Medicaid. HCA Holdings, the largest for-profit U.S. hospital chain, has 25 percent of its beds in Texas and 25 percent in Florida, according to Brian Tanquilut, an analyst at Jefferies in Los Angeles.

For-profit hospitals such as Tenet are unlikely to pass along the costs of the cuts to consumers in the way of raising rates to nongovernment payers, Tanquilut said. "They'll eat it," he said.

Cuts in the Medicare DSH payments also will be offset by a separate April 26 regulatory proposal that would lead to a 0.8 percent net raise in overall Medicare payments for services that elderly and disabled patients get after being admitted to hospitals, Tanquilut said.

The overall Medicare rate - which includes the Medicare cuts to hospitals that treat a large number of low-income patients - should keep HCA's earnings before interest, taxes and amortization expenses within its February guidance, R. Milton Johnson, president and chief financial officer, said on an April conference call with investors.

The saving grace for for-profit hospitals, Tanquilut said, is that the Affordable Care Act will bring financial benefits that nonprofit and public hospitals such as Truman Medical will not see. Large, urban hospitals that provide the biggest share of charity care and treat more Medicaid patients are most at risk, Moody's Investors Service said in a March 14 report.

With only about one-fifth of their patients having commercial insurance, these safety-net hospitals typically have profit margins of about 2.3 percent, a third of the industrywide average for all hospitals, according to 2010 data from the National Association of Public Hospitals and Health Systems. Losing Medicaid funding and not gaining more insured patients would swing that margin from a profit to a loss of 6.1 percent.

Hospitals may try to recoup losses by limiting the amount of care they provide to the uninsured or reducing staff, John Graves, an assistant professor at the Vanderbilt University School of Medicine in Nashville, Tenn., said in an interview. "They're in a tight bind," Graves said. "They have to recoup those losses through fewer services, shutting down."

Grady Health System in Atlanta, which had estimated it may lose $45 million annually in Medicaid payments, has been meeting with U.S. lawmakers to try to repeal or change the cuts, said John Haupert, chief executive at Grady.

"We're having discussions with Congress and the administration to give states that don't expand Medicaid an option to not extend the DSH cuts," Haupert said in an interview. For some hospitals, "it's a matter of their doors being opened or closed."

Grady gets about 30 percent of its business from Medicaid, while Truman Medical gets about 60 percent.

In addition to the American Hospital Association, the National Association of Urban Hospitals also said it is lobbying Congress to delay or revisit the Medicaid DSH cuts.

Emma Sandoe, a spokeswoman at the Centers for Medicare and Medicaid Services, said the agency would not comment on the pending cuts.

Obama's 2010 health-care system overhaul promised to deliver an increased number of insured patients who could pay their bills, thus reducing the need for government assistance to hospitals burdened by uncompensated care. That promise would be accomplished by making 11 million more people become eligible for Medicaid, a program largely financed by the federal government yet controlled by each individual state.

As of May, at least 15 states, all with Republican governors, are not planning to participate, according to a tally by the Washington-based Advisory Board Co. States with high levels of uninsured patients leaning toward opting out of the expansion include Texas, Louisiana, Idaho, Georgia and South Carolina, according to Moody's.

The looming DSH reductions may pressure states that are still weighing Medicaid expansion, because they know they will face a financial quandary, said Larry Gage, a senior adviser with Alvarez & Marsal, a New York-based professional services firm, who was once president of the public hospitals association.

"There are hospitals already in danger of closing in the next six to 12 months," Gage said.

This is another one of those thorny subjects where placing blame is difficult. Is this the fault of Obamacare itself, or the fault of the state governments not cooperating with it?

Facism is not a school of thought, it is a racial slur.

Corporate News: Eateries Fear Health Law's Bite
By Julie Jargon

15 May 2013
(Copyright (c) 2013, Dow Jones & Company, Inc.)


Some restaurant operators are scaling back expansion plans because of uncertainty about the expense of insuring employees under the new federal health-care law.

The concerns are especially acute among smaller operators who are more likely to be on the cusp of the Affordable Care Act's requirements for increased coverage of workers. The doubt is adding to anxiety over other rising costs for items like ingredients at a time when diners are cutting back on eating out.

Sam Ballas, chief executive of ECW Enterprises Inc., owner of East Coast Wings & Grill, a 26-unit chain in North Carolina and Texas, in March imposed a three- to five-unit limit, for the time being, on the number of restaurants that franchisees can own, because of worries about health-care costs.

The law requires employers with more than 50 full-time equivalent employees -- those who work 30 hours or more a week -- to start offering health insurance to full-time employees in 2014, or to pay a penalty.

Mr. Ballas said several East Coast Wings franchisees are up against that limit now and that one is considering selling a restaurant to remain below the threshold.

"There is no question that the Affordable Care Act has thrown a wet blanket on franchise development," said Stephen Caldeira, CEO of the International Franchise Association. In a recent survey of its members, the trade group found that 64% of franchisers and almost 72% of franchisees said the health law creates some uncertainty or significant uncertainty in long-term planning.

The restaurant business has been a focus of debate about the health-care law's impact, in part because of its heavy reliance on part-time workers who don't currently have coverage. Some executives have warned that it could hobble the industry, although some companies, including Wendy's Co., have scaled back initial estimates of how much the law will cost their restaurants, and others, such as Dunkin' Brands Group Inc., have played down the impact the health-care overhaul will have on the industry.

The Obama administration says the health-care law will benefit small businesses like franchises, in part by creating insurance marketplaces where they can pool their buying power. "The Affordable Care Act will save money for businesses while giving workers and employers access to quality, affordable health care," said a Treasury Department spokeswoman.

The law hasn't crimped expansion plans for some big restaurant companies. McDonald's Corp., which estimates the law will cost $10,000 to $30,000 per restaurant, is opening more new restaurants in the U.S. this year than it has in each of the past three years. A spokeswoman said she hasn't heard of franchisees scaling back expansion plans.

For others, though, the law adds to other reasons for caution. White Castle Management Co., a closely held chain that doesn't franchise any of its 406 restaurants, says it is significantly slowing its growth plans in light of rising health-care and other costs. The burger chain plans to open two or three new restaurants this year, down from about a dozen three years ago, and five in both 2011 and 2012, company spokesman Jamie Richardson said.

White Castle currently offers health insurance to employees who work 35 hours or more per week, and 80% of eligible employees accept. Under the law, the offer will have to extend to those who work 30 hours weekly, and employees who refuse will have to pay a penalty. "What we don't know is what percentage who decline insurance now will sign up for it" when the law takes effect in January, Mr. Richardson said. "This has caused us to re-examine our strategy."

Franchisees say some of the law's details, such as how employers will count workers' hours, have yet to be finalized, limiting their ability to plan. Joe Drury, who owns 22 Wendy's restaurants in Tennessee and Virginia that employ 600 people, said he wants to open three more restaurants next year. But "if the Affordable Care Act costs me too much money, I'm not going to. It's as simple as that," he said.

ObamaCare Side-Effect: Fewer Hours, More Gov't Aid

By JED GRAHAM, INVESTOR'S BUSINESS DAILY
Posted 05/16/2013 07:10 PM ET


ObamaCare was sold as a way to achieve several goals: affordable care, guaranteed coverage, protections against bankruptcy.

But before such promises have a chance of being realized, the health reform appears to be delivering something else: Germany-style work-sharing.

Germany's program gives employers incentives to cut hours instead of payrolls, as government supplements pay of workers facing shorter shifts.

Back home, employers are cutting hours to avoid ObamaCare fines for failing to provide full-time workers with broad, affordable coverage. There's evidence that firms are adding workers and reducing hours.

Economists hailed Germany's work-sharing for reducing unemployment during the recession. ObamaCare may be having a similar effect. But there are differences that make the health reform's labor side-effects much more questionable.

Over the past year, retailers have cut average weekly hours for nonsupervisory workers by 2%, the sharpest such decline in more than three decades. Meanwhile, rank-and-file employment is up 132,000, or 1%, over the same period.

Also, total benefits for service-occupation workers fell in Q1, the first decline on record, in a sign that employers are preparing to shift some costs of health care coverage to the government.

Some 2.3 million workers might have their hours cut due to ObamaCare's employer mandates, even if there's no negative impact on total hours worked, a recent study from the University of California at Berkeley Labor Center estimated.

The other part of the equation involves more government benefits for those facing shorter hours. This will come starting in 2014 from ObamaCare health subsidies. Households working less may also get additional benefits, such as food stamps.

While Germany's work-sharing is seen as an antidote to recession, ObamaCare is long-term.

ObamaCare's incentives to limit employee workweeks will remain in effect at all points of the economic cycle.

Another big difference relates to whom the work-sharing will impact. In Germany, work-sharing helps firms cut costs because the unionized share of the labor force is much higher and it is hard to dismiss workers.

The program is tailored to deal with short-term declines in factory orders, for example.

But ObamaCare's employer mandate will primarily affect the hours of the modest-wage service-industry employees who will be eligible for the program's subsidies.

It seems likely that this long-term tilt toward part-time jobs for modest-skilled workers will lead to two unwelcome results.

More workers will have extra difficulty climbing above the bottom rung of the corporate ladder.

Also, more people will work multiple jobs, at a likely cost to individual productivity and quality of life.


Workers put parts on a TGX truck at the MAN factory in Salzgitter, Germany, in 2011. The truck and bus maker is among the many German companies that... View Enlarged Image

Still, there is much uncertainty as to how far-reaching the shift to more part-time work and government benefits will be. The 2.3 million workers seen as likely candidates for shorter shifts in the University of California study only represent about 1.8% of workers.

But there are reasons to think the impact will be greater. For one, the study doesn't count firms with fewer than 100 workers or new hires limited to part time due to ObamaCare incentives.

The Berkeley study authors see their estimate as being supported by Hawaii's experience. The state saw a 1.4 percentage point rise in the share of workers clocking sub-20 hours a week after it required health insurance for those working 20-plus hours.

Beyond the difficulty of running a firm with under-20-hour workers, there's reason to believe that ObamaCare's impact on hours may be far bigger than in Hawaii.

Consider the up-to-$3,000 penalty firms will face per worker who gets ObamaCare subsidies. The nondeductible penalty equates to more than $4,000 in wages for profit-making firms.

For workers making $12 an hour for 29 hours, an employer would have to pay an extra 60% — $17 an hour — for the next 11 hours of work, once potential ObamaCare fines are factored in.

By comparison, an employer would have to pay an extra 30% per hour — $15.70 — for the extra 21 hours of work beyond the 19-hour Hawaii threshold.

A wild card is that employees may choose not to pay for ObamaCare, even with the subsidies, in which case no penalty would be imposed on employers.

Facism is not a school of thought, it is a racial slur.

For the record, the common, but not universal, abbreviation used by the government is ACA.

Your opinions are interesting. This is the right place for them.

The real question people need to be asking is: Why does our health care cost so damn much in general?

Facism is not a school of thought, it is a racial slur.

Yes the government is a factor, but if you're going to claim the main cause is the government you also need to explain why our government is somehow so uniquely incompetent compared to virtually every other country on the planet whose governments also run their health care systems. South Korea's government healthcare insures its entire population cradle to grave for less money per capita than we spend on Medicare and they have far better health outcomes than we do.

Facism is not a school of thought, it is a racial slur.

We know the answer to that question. That question has been answered for you, specifically, Xequecal, on these forums no less than a dozen times. I will answer it one final time: the United States Federal government. Incidentally, the year 2013 will demonstrate that Obama has been willfully deceiving the American public about the costs, effects, and ability of the United States to implement Obamacare. Every medical care provider I use has shifted to payment in full before service and shifted to patient filing for their insurance; this includes two regional hospitals. That problem is only getting worse nationwide.

So, please, for the love of god, keep telling us we need government to solve a problem government created.

In comic strips the person on the left always speaks first. - George Carlin

The point is there are dozens of countries around the world that receive much better health care for much less money despite the fact that their governments run their health care systems.

Why is "more government" automatically going to be a failure when it "works" (Yes, many of these countries also have sustainability problems, but the fact is the state of their health care is much better than ours) for so many other countries? Why is our government, and only our government, doomed to completely fail and only make things worse?

Facism is not a school of thought, it is a racial slur.

I still say the root cause is the need for medical-tort reform and unreasonable expectations for end of life treatment.

Facism is not a school of thought, it is a racial slur.

Again, what objective performance measures are you using to make this claim? Stop feeding me bald assertions that these governments are providing better healthcare. In, what the Democrats call a doctor driven, capitalist cess pool of health care, we can't get enough qualified providers in the United States.

The first is an issue created by government; the latter an issue created by listening to government lies.

In comic strips the person on the left always speaks first. - George Carlin

South Korea's government healthcare insures its entire population cradle to grave for less money per capita than we spend on Medicare and they have far better health outcomes than we do.

The point is there are dozens of countries around the world that receive much better health care for much less money despite the fact that their governments run their health care systems. Why is "more government" automatically going to be a failure when it "works" (Yes, many of these countries also have sustainability problems, but the fact is the state of their health care is much better than ours) for so many other countries?

You cannot directly compare the actual cost-effectiveness of the health care systems between the countries. That's impossible, there's far too many variables. However, you can compare the outcomes and we're losing badly on that front.

Please, please, tell us what "outcomes" you are talking about. You've been asked multiple times to explain these assertions, and yet, you do not. Either explain how other countries have "much better health care" and "far better outcomes" than you find in the US, or stop making such assertions.

Why does our health care cost so damn much in general? Then, they need to focus on fixing those problems. And don't say the problem is "the government."

Please, please, tell us what "outcomes" you are talking about. You've been asked multiple times to explain these assertions, and yet, you do not. Either explain how other countries have "much better health care" and "far better outcomes" than you find in the US, or stop making such assertions.

Facism is not a school of thought, it is a racial slur.

Micheal:

DFK isn't posting opinions; he's posting facts.