VCU Medical Center and the University of Virginia Medical Center stand to lose about $500 million in federal funds to care for people with no health insurance from 2017 to 2022 through looming cuts under the Affordable Care Act.
Secretary of Health and Human Resources William A. Hazel Jr. revealed the newly estimated losses to the two academic medical centers during a meeting Tuesday of the Medicaid Innovation and Reform Commission, which is considering whether to expand Virginia’s Medicaid program under the federal law.
Without Medicaid expansion, the cuts in federal subsidies for indigent care would be “disastrous,” said Dr. Sheldon M. Retchin, chief executive officer of the VCU Health System. “It’s going to look like Calcutta. It’s going to be bad.”
“I think then you’ve got two Americas,” Retchin said Tuesday.
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The losses will put state lawmakers on the spot beginning in 2017, when they will have to decide whether to make up the federal share as well as paying the state’s matching portion.
“A decision will have to be made in Virginia at that time whether to cover that (loss) with state money or to let it go altogether,” Hazel said.
The cuts were included in the 2010 law under the expectation that all states would expand their Medicaid programs, reducing the need for federal and state subsidies of hospitals, such as VCU and U.Va., which carry a heavy load of uncompensated care for the uninsured.
But the U.S. Supreme Court made expansion optional in 2012, and Virginia has balked at extending coverage to as many as 400,000 people on Jan. 1, even though federal funds would cover the full cost for the first three years under the law.
Retchin said he had not seen the new estimate by the Department of Medical Assistance Services, which runs the state Medicaid program for the poor, elderly and disabled.
“I don’t know how you get to $500 million,” he said. “That’s a big number.”
The money represents the federal share of funds matched by the state for hospitals that provide a “disproportionate share” of care for people with no health insurance or financial resources to pay their medical bills. VCU provides more uncompensated care than any hospital in the state, followed by U.Va.
The annual payments also include other sources of revenue for academic medical centers, such as graduate medical education, because of their twin public mission of medical education and medical care.
The federal government already has begun scaling back its payments for indigent care under the Affordable Care Act, but the cuts are expected to accelerate in 2017, state officials said. At the same time, Virginia already is nearing a federal limit on disproportionate-share subsidies, they said.
Virginia hospitals are bracing for an estimated $450 million in cuts from Medicaid and Medicare in 2017 under the Affordable Care Act and the budget sequestration process begun by Congress in 2011 to force cuts in federal spending, according to the Virginia Hospital and Healthcare Association.
“The trajectory is not a good one for hospitals,” said Katharine M. Webb, senior vice president of the association, based in Innsbrook.
Virginia’s private hospitals and academic medical centers also would lose money for indigent care and treatment of Medicaid patients under the two-year budget proposed Monday by Gov. Bob McDonnell.
McDonnell proposed to delay adjusting hospital Medicaid payments for inflation by a year, resulting in an estimated reduction in state spending of more than $34 million.
The governor’s proposed budget also would reduce the state’s subsidy of indigent care at VCU and U.Va. by $15 million, as well as delay adjustment of their Medicaid payments for inflation by a year for an additional cut of $9.3 million. However, the budget still includes $174.5 million over two years in state disproportionate-share payments for VCU alone, and about $99 million for U.Va.
The perilous situation for academic medical centers and private hospitals puts pressure on lawmakers who are grappling with the politically divisive issue of whether to expand the state’s Medicaid program.
Del. R. Steven Landes, R-Augusta, a vocal opponent of expansion and vice chairman of the Medicaid commission, suggested Tuesday that the hospital industry “wouldn’t have gone along” with the federal health care law if it had known the Supreme Court would make Medicaid expansion optional.
Economist Len M. Nichols, director of The Center for Health Policy and Research and Ethics at George Mason University, agreed that with the possibility of half the country not expanding their Medicaid programs, “the math took a hit” for hospitals that had counted on expansion to compensate for other cuts under the law.
But Nichols added, “They might have been for it anyway because they’re treating the uninsured.”