Gov. Tom Corbett’s decision to forego an expansion of Medicaid is drawing criticism in some health care circles.
The move would make a quarter of Pennsylvanians eligible for medical assistance coverage.
Advocates say the decision is not only unfortunate for the hundreds of thousands of Pennsylvanians who will not gain insurance. The move could be fatal to small, rural hospitals that find themselves providing too much uncompensated care.
The reason? The federal government plans to reduce the amount it reimburses hospitals because there were supposed to be fewer people without insurance showing up for medical care due to the Affordable Care Act.
“Federal (disproportionate share) payments are significantly cut beginning in 2014 with the start of the ACA coverage. The monkey wrench is that the Supreme Court decision made the Medicaid expansion optional for states by essentially removing the enforcement mechanism of denying all Medicaid funding if states did not expand,” said Ann Bacharach with the Pennsylvania Health Law Project.
Pennsylvania hospitals received more than $500 million in these disproportionate share payments in fiscal 2011.
“So, if Pennsylvania does not expand Medicaid, hospitals will still be required to provide care to the uninsured under federal law but will see their compensation for those patients seriously curtailed,” Bacharach said.
The Center for Rural Pennsylvania estimated that one-quarter of Pennsylvania’s rural hospitals are already financially distressed and the strain of absorbing more of the cost of treating uninsured people could be more than many can bear.
A spokeswoman from the governor’s office did not dispute the concerns about the uncompensated care costs, but suggested the federal government is to blame for holding hospitals hostage.
“We are aware and have strong concerns with the federal government’s proposal to take away millions of dollars for Pennsylvania hospitals,” said Corbett spokeswoman Christine Cronkright.
“Payments to hospitals have always been partly based upon the amount of uncompensated care delivered, and it appears that the federal government is trying to leverage hospitals and place them unfairly in the middle of states’ expansion decisions.”
The Corbett administration and Republican lawmakers said the decision to pass on expanding Medicaid was influenced by concerns about the local costs required to get the federal match, suspicion that the federal-government may not meet its obligation to fund the effort, and frustration over the lack of flexibility provided to states in determining how to participate.
The governor’s office also pointed to problems with poor accountability with the medical assistance program.
The administration said it estimated that participating in the Medicaid expansion that would add 800,000 to medical assistance would cost Pennsylvania $1 billion through 2014-15 and a total of $4.1 billion.
Advocates say the governor is overestimating the number of people who would be added to the Medicaid rolls and misrepresenting the costs. Bacharach, with the health law project, said census estimates suggest about 475,000 people would be eligible for Medicaid under the expansion.
The study by the health law project and the Office for Rural Health found that the expansion would save the state more than $300 million and generate more than $50 million in new tax revenue on managed care companies that would expand to meet the demand created by the increased number of people enrolled in Medicaid.
And the state’s investment would pave the way for $43 billion in federal contributions to the cost of expanding Medicaid over the next decade, said Antoinette Kraus of the Pennsylvania Health Access Network.