Don’t limit Medicaid services at hospitals

The Bush administration’s antipathy toward Medicaid — the federal and state health insurance program for the poor — has been well-established over its eight years in power. Through various rule changes and other steps, the White House has repeatedly attempted to shift the financial burden of Medicaid to the states, and is doing so again at a time when the states are least able to afford it.

Such cost-shifting is more than just a political dispute between state health officials and Washington. It has the potential to deny low-income Americans, especially children, the medical services they need to stay healthy.

The latest directive — issued three days after the November election and scheduled to take effect Jan. 1 — sounds deceptively benign. It limits the scope of outpatient services performed by hospitals that can be covered by Medicaid. But if it is allowed to stand, the impact on outpatient services for dentistry, oral surgery, hearing and vision care and a range of other services at Atlanta’s Grady Memorial Hospital and similar safety-net hospitals could be devastating. The lame-duck Congress reconvening this week in Washington should enact a moratorium on the rule.

As it has in previous rule changes, the administration claims the new directive is not intended to limit access but to ensure that medical services for Medicaid’s 50 million low-income recipients are provided in the least costly setting. Since hospitals are allowed to build overhead charges into their Medicaid reimbursement rates, the administration wants to make sure that most outpatient services are performed at doctors’ offices or public health clinics, where the cost is thought to be cheaper. If services can’t be obtained outside a hospital, the administration pledged, the hospital can still bill Medicaid for the service at its regular rate.

But in real life, it rarely works that way. Most private-practice physicians refuse to take Medicaid patients because the payments are so low, so determining whether the services are available elsewhere is not a simple task. Plus, many public health clinics and federally subsidized health centers don’t offer the range of services — such as oral surgery, dental and vision care — available through hospitals and their clinics. That’s why, as a practical matter, Medicaid patients are often channeled to public hospitals, and why those hospitals are so dependent on Medicaid to stay financially healthy.

More than half of Grady’s patients, for instance, are covered by Medicaid, and they account for a large share of the hospital’s more than 800,000 outpatient visits each year. Any change in Medicaid rules can make a huge difference in Grady’s bottom line, which has been in the red for most of the last decade. As it is, Medicaid only reimburses Grady and other public hospitals 80 to 90 percent of their cost of providing services. No hospital makes a profit taking care of Medicaid patients.

Under the rule, if states want to allow more outpatient services at hospitals, they must find the money themselves. That cost-shift comes at the worst possible time. Like Georgia, most states have taken a severe revenue hit in the nationwide recession. (Georgia’s Medicaid program, under orders to reduce spending, is struggling to pay its portion of coverage for more than 1 million Georgians enrolled in the program.) Around the country, legislatures and budget makers are considering reductions in Medicaid spending. Few states would be in a position to pay hospitals more to continue providing these vital services.

The Bush administration’s rule change also comes just as President-elect Barack Obama, congressional leaders and representatives of the National Governors Association have endorsed increasing federal Medicaid funding to the states as a part of a new economic action plan for the nation.

With millions more Americans unemployed in recent months, Medicaid enrollment is expected to grow even more next year. Aid to the states to help offset the cost of that enrollment growth must be considered a part of any economic recovery plan, as the governors’ group made clear to the president-elect in a meeting Tuesday.

In the last 18 months, Congress has blocked six other Bush administration rules relating to Medicaid spending from taking effect. It should do so again, and when Obama takes office, he should promptly rescind the latest directive.

— Mike King, for the editorial board (mking@ajc.com)