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Medicaid Underfunding
Feb 08, 2007
We All Pay the Price for Medicaid Underfunding
by M. Beatrice Grause, RN, JD
President and CEO of Vermont Association of Hospitals and Health Systems
We Vermonters pride ourselves on being thrifty and buying only what we can afford. But that’s not what’s happening in health care.
Although we still have uninsured residents, health care access in Vermont is a pretty good success story. We’ve done that by using Vermont’s Medicaid program to extend coverage to folks who wouldn’t ordinarily be eligible, and we’ve agreed to pay for services in addition to those required by federal law. The result is that we have among the fewest uninsured residents of any state in the country. Almost one in four Vermonters have some kind of Medicaid benefit, and those benefits cover a broad range of services - like doctor visits, hospital care, prescriptions, dental care, nursing home care and physical therapy.
So what’s the problem? It’s simple: the state promises these benefits, but doesn’t pay their full cost. And the providers who serve Medicaid patients - doctors, dentists, hospitals and the like - have to cover those unpaid costs from somewhere else. Whether you realize it or not, you’re helping to pick up that tab every time you pay a health insurance premium or your property taxes.
The Department of Banking, Insurance, Securities and Health Care Administration (BISHCA) estimates that Medicaid underfunding, also known as “cost shifting” will total $89.7 million in 2007 just for hospitals alone. Hospitals do what they can to absorb their Medicaid losses along with losses from charity care, bad debt, and Medicare underpayments - a combined loss of $200 million this year. But what they can’t absorb, they have to pass on in the form of higher charges (prices) to private insurance companies, who have to raise premiums to help cover these losses. In turn, Vermont businesses and their employees with commercial health insurance have to pay those higher premiums. The shell game doesn’t stop there. Because property taxes pay for health benefits for municipal employees, teachers, and town administrators, they include some of this cost shift too.
Ironically, the Vermonters who suffer the most from the Medicaid cost shift may well be the beneficiaries themselves. Medicaid underpayments can, and increasingly will, result in reduced access to appropriate health care services for our most vulnerable residents. Take primary care, for example - a service the state has made a priority as part of Vermont’s recent health care reform legislation. Primary care physicians in Vermont receive just under $34 for seeing a Medicaid patient for a routine office visit, but the actual cost of providing that visit ranges between $52 and $60. At that rate, how much longer can physicians afford to treat Medicaid patients? Increasing physician reimbursement is long overdue and would help shore up our rural health care infrastructure.
Ending the cost shift also makes good economic sense. For every additional dollar the state spends on Medicaid, the Federal government contributes $1.43. Closing the $89.7 million Medicaid gap that we’re all paying for in other ways will cost approximately $48 million in state dollars thanks to the Federal match.
The insidious problem of Medicaid (and Medicare) underfunding affects us all. Government is a key health reform partner. This partnership requires that they keep their promises to patients and the providers who care for them. Fully funding the Medicaid program is a fundamental and essential step the state should take toward creating a high quality, financially stable health delivery system affordable for all Vermonters.
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