Georgia hospitals were depending on the health care law to ease the burden of treating hundreds of thousands of uninsured patients each year for free. But that relief may never come.
While upholding the law, the U.S. Supreme Court ruled states could reject the massive expansion of the Medicaid program that is a cornerstone of the Patient Protection and Affordable Care Act. For hospitals, not expanding the health program for poor and low-income Georgians would mean having to treat almost as many uninsured patients as ever while facing significant cuts to their reimbursements.
Last year, Georgia hospitals lost an estimated $1.5 billion caring for people without insurance. The promise of fewer uninsured is what led the national hospital industry to agree to the health law's $155 billion in Medicare and Medicaid cuts over a 10 year period.
The Medicaid curveball comes at a time when Georgia hospitals are already in the throes of a massive industry transformation to improve quality and efficiency driven by market forces as well as the new law.
Hospitals face lower payments from insurers and pressures to consolidate. One in three Georgia hospitals lose money. All are busy preparing for new standards under the law that, if not met, could mean millions of dollars in penalties.
The unexpected prospect of lower reimbursements without the expanded pool of patients has hospitals worried.
"If we get the cuts and not the coverage, that's a game changer for us," said Kevin Bloye, a spokesman for the Georgia Hospital Association.
"Hidden cost on every citizen"
Georgia Gov. Nathan Deal is worried too.
He and state lawmakers have a big decision to make. After the Supreme Court decision, Deal said he wanted time to gather more information — and to see whether the results of the November elections would lead to the law's repeal.
Expanding Medicaid in 2014 would add about 650,000 people to the program, which now covers about 1.7 million Georgians, by extending coverage to anyone with an income up to 133 percent of the federal poverty level, or $31,000 for a family of four. Georgia's program currently covers mostly poor children, pregnant women, the elderly and the disabled.
The states and the federal government currently share the cost of Medicaid, but the feds would cover 100 percent of the costs of the new recipients during the first three years and at least 90 percent thereafter.
State officials estimate that an expanded Medicaid program would cost the state $4.5 billion over 10 years while bringing in about $35 billion in federal money. Deal has said repeatedly that he's worried about whether the state can afford its share. Georgia is already facing a $300 million Medicaid shortfall this fiscal year.
"To pay for the expansion without tax increases would require the state to cut nearly a quarter of its annual budget," said Brian Robinson, a spokesman for Gov. Deal. "And that's after we've shaved off billions in state spending since the beginning of the Great Recession."
Georgia is one of at least 10 states that may reject the Medicaid expansion, according to a recent report by the nonprofit Brookings Institution.
Funding an expansion would take approval from the legislature, Robinson said. He added that the governor worries the federal government, already nearly $16 trillion in debt, won't be able to sustain it's share of the cost.
"We get left holding the bag," he said. "That's a major concern."
But others wonder whether Georgia can afford to pass up billions in federal dollars to care for the uninsured.
Georgians already pay for the cost of care provided to people without insurance through higher hospital bills and inflated insurance premiums.
"That is a hidden cost on every citizen in the state," Bloye said.
If the health law doesn't offer some relief, hospitals will continue to raise prices for insured patients to make up what they lose on caring for the uninsured. The end result: higher insurance costs for companies and their workers.
"That's the conundrum we're in," Bloye said, "trying to contain this runaway train of health care costs that are killing Georgia businesses and employees."
Cutting costs
The uncertainty over Medicaid comes as hospitals are grappling with the requirements of the law and the rapidly changing industry.
Escalating costs and pressure from insurers are spurring providers to find new ways of improving quality and curbing costs.
As a result, hospitals are investing countless man hours and tens of millions of dollars to revamp the way they do business. The new approach aims to reward doctors and hospitals for keeping patients as healthy as possible, instead of paying them for every test and procedure.
To get there, hospitals are working to coordinate care by directly employing primary care doctors, establishing outpatient clinics, forging partnerships with home health care companies and investing heavily in new technology.
Stronger health systems will have the ability to deal with slimming profit margins and react quickly to new mandates under the law -- many of which are still unclear, said Reynold Jennings, CEO of WellStar Health System in metro Atlanta.
Over the next two years, the five-hospital system plans to shell out roughly $170 million for an electronic records system that will allow providers to share information instantaneously -- cutting down on duplication of costly tests and mistakes.
"Get as big as you can get and as strong as you can get as an organization is the overarching strategy," Jennings said.
The challenges won't get any easier. Hospitals are facing declining payments from Medicare -- a trend commercial insurers will likely follow. But they stand to lose tens of millions more dollars under the law if certain requirements aren't met.
Under the law, Medicaid no longer pays for hospital-acquired conditions. They will also face losing millions of Medicare dollars if too many discharged patients end up readmitted within 30 days.
"Everyone's been looking at ways to reduce overall costs," said Kelvin Baggett, chief medical officer for Tenet Healthcare Corp., which runs several hospitals in Georgia.
Tenet-owned Atlanta Medical Center has partnered with pharmacies and home health care companies in an effort to curb avoidable readmissions. Pharmacists meet with patients before discharge to make sure they understand their medications. Home health care nurses make sure patients go to follow-up visits.
"We have to partner to better manage that care," Baggett said.
"Vulnerable to closure"
Almost every expert — whether they support the Affordable Care Act or not — says hospitals can't provide so much free care if they are to achieve the goal of improving quality and lowering costs.
For some hospitals, their survival is on the line, especially if Georgia doesn't go through with the Medicaid expansion.
"There's a lot of rural hospitals who thought they were going to have a much easier ticket for sustainability who are going to be more vulnerable to closure than they would have been," said William Custer, a health care expert at Georgia State University.
Small hospitals, experts say, may not have the resources to invest tens of millions of dollars in electronic records systems and other critical improvements.
Kelly McCutchen, president of the Georgia Public Policy Foundation, opposes the health care law. But he believes Georgia must relieve hospitals of the burden of caring for so many people without insurance.
Like Deal, McCutchen hopes the law won't survive the November elections. But if it does, he said Georgia should request a waiver from the federal government and seek a block grant of Medicaid money that would allow it to take a more creative approach -- an idea that has been pushed by some Republican governors and members of Congress. Prononents argue block grants would free states from burdensome federal requirements — allowing them the flexibility to design programs to meet the unique needs of individual states.
One solution would be to offer subsidies to low-income Georgians to help them buy insurance, McCutchen said, adding that he isn't opposed to the idea of a Medicaid expansion. It just shouldn't be expanded in its current form, which isn't working, he said.
"We certainly think we have got to do something about health care, and uncompensated care is a real issue," he said. "But it's an issue that doesn't need a 2,000-page bill."
Gov. Deal voiced his support last year for a Republican proposal to turn Medicaid into a block grant program saying it would make Medicaid more efficient and sustainable.
Robinson, Deal's spokesman, added that the governor realizes the current health care system needs to be reformed, but the health care law isn't the answer.
"The answer to an unsustainable problem is not to create an even more unsustainable problem," he said.
Russ Toal, a former director of Georgia's Medicaid program who is now a health policy expert at Georgia Southern University, said Georgia should move forward with an expanded Medicaid program.
Those who would get the coverage -- many of them low-income who don't have insurance -- would clearly benefit, Toal said. Coverage might offer a means to get regular medical care that would help them avoid costly health problems, he said. The expansion will also inject the state with billions of health care dollars that will create jobs and strengthen a health care system that every Georgia family relies on at one time or another.
"The economic benefit that will come from an infusion of billions of federal dollars to the state," Toal said, "would be impossible for the state to replicate on its own."
The Georgia Hospital Association plans to work with the governor and lay out hospitals' concerns about the potentially devastating financial impact of not expanding Medicaid, Bloye said.
"We have confidence he'll make the best decision for all of Georgia," he said.
Medicaid conundrum
The state's Medicaid program currently covers about 1.7 million poor and low-income Georgians — mostly children, pregnant women, the elderly and disabled. Nearly 2 million Georgians are uninsured.
Expanding the program under the law would extend coverage to roughly 650,000 people with incomes up to 133 percent of the federal poverty level, or $31,000 for a family of four. The federal government would pay 100 percent of the costs for new recipients for the first three years and at least 90 percent thereafter.
Officials estimate the expansion would cost the state $4.5 billion over the next decade, while bringing in $35 billion in federal funding.
Expanding Medicaid would help Georgia hospitals offset the cost of caring for uninsured patients. WellStar Health System, which runs five hospitals in metro Atlanta, spent $130 million caring for the uninsured in fiscal 2011 alone. That's roughly 10 percent of the system's total health care costs and reflects a 16 percent increase from the previous year.
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