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How a state’s choice on Medicaid expansion affects hospitals

December 26, 2014 at 6:35 PM EDT
In negotiating the creation of the Affordable Care Act, hospitals took a big gamble, with the expectation that they would soon have millions of new Medicaid customers. In states that expanded Medicaid, the bet paid off. Sarah Varney of Kaiser Health News reports on financial gains made by some hospitals as more patients are able to pay their bills, and the heavy price being paid by hospitals in states that opted against expansion.
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JUDY WOODRUFF: The White House said this week that more than 6.4 million people have signed up for health insurance plans through the Affordable Care Act’s federal marketplace so far during this year’s open enrollment season.

But even more people, nine million-plus, have gotten covered by Medicaid in recent months. And the decision by states whether or not to expand that federal-state program for the poor and those with disabilities is having a serious effect on the financial health of hospitals.

Sarah Varney from our partner Kaiser Health News has that story.

SARAH VARNEY, Kaiser Health News: A steady drizzle hasn’t deterred Jason Whiten from coming to this clinic in South Seattle to see if he qualified for Apple Health, Washington’s popular Medicaid program.

ISRAEL RUBINOS, Neighborcare Health: You don’t have any medical insurance, right?

JASON WHITEN: No.

ISRAEL RUBINOS: No? OK. And how about dental?

JASON WHITEN: No.

ISRAEL RUBINOS: No dental, no medical?

JASON WHITEN: No.

ISRAEL RUBINOS: OK.

SARAH VARNEY: Whiten, who is 34 years old, has gone without health insurance for 16 years.

ISRAEL RUBINOS: So you got approved for the Washington Apple health program…

JASON WHITEN: OK.

SARAH VARNEY: He can come here to this Neighborcare Health clinic, instead of the emergency room, to see a physician. It’s his first insured primary care checkup since becoming an adult.

DR. MARCUS REMPEL, Neighborcare Health: And just take breaths in and out and relax.

SARAH VARNEY: Medicaid had long been restricted, mostly to poor children and pregnant women and the disabled. Under the Affordable Care Act, states could open up their programs to nearly all poor adults; 27 states and the District of Columbia accepted the federal funds to do so.

The state of Washington took up the cause with mission-like zeal. King County officials worked closely with community partners to put advertisements and enrollment helpers in the places visited by the working poor — like libraries, bus stations, courts, food banks, even restaurants.

SARAH VARNEY: King County Executive Dow Constantine says Washington blew past Medicaid enrollment targets it didn’t expect to reach until 2017. The county acted quickly, he says, because it could no longer bear the cost of so many uninsured residents.

DOW CONSTANTINE, King County, Washington, Executive: It costs us all. It costs us in absenteeism at work. It costs us in days missed at school, and it just plain costs us on our health care bills. It is irrational. And the ACA presented us an opportunity to have a more rational system. And we took it.

SARAH VARNEY: These aggressive efforts to sign up Washington residents for Medicaid has been a boon to hospitals. Here at Harborview, Seattle’s largest safety net hospital, the percentage of uninsured patients has dropped from 14 percent to 4 percent.

Under the Affordable Care Act, most people who walk through Harborview’s doors, like Ghidey Tesfaye, are eligible for some form of insurance. In the past, Harborview would have treated uninsured patients like Tesfaye and been stuck with the bill.

Indeed, Harborview provided about $220 million in so-called uncompensated or charity care last year. The federal government helps cover some of those costs, since hospitals can’t turn patients away from the E.R. But during negotiations over the health law, hospitals took a big gamble. They agreed to staggering cuts in federal uncompensated care payments, with the expectation that they would soon have millions of new Medicaid customers.

For hospitals in states that expanded Medicaid, the bet paid off.

Johnese Spisso oversees the University of Washington’s clinics and hospitals, including Harborview.

JOHNESE SPISSO, Chief Health System Officer, U.W. Medicine: We anticipate our numbers for charity care this year will reduce by about 20 million to 30 million. And as we continue to get more patients signed up, we see that flattening.

SARAH VARNEY: Moving Medicaid patients away from expensive emergency care to primary care clinics is another way the hospital is trying to save money.

Seattle resident Zoe Azalea says it is a change that has helped her take control of her health again. For three years, the former nurse relied on yoga in the park as one of her only means of dealing with crippling pain. A series of accidents left her unable to work, and she lost her health insurance. Without access to physical therapy, the results became devastating.

ZOE AZALEA, Harborview Medical Center Patient: I wasn’t able even to use this hand at all or grip. And I couldn’t even pick up a water bottle.

SARAH VARNEY: A social worker called Azalea at home and urged her to enroll in Apple Health. Now that she has her Medicaid card, she has been able to get physical and occupational therapy and see specialists, including a spine doctor.

Dr. Richard Goss is the medical director at Harborview. He says, insured patients undeniably get better access to medical care than uninsured ones.

DR. RICHARD GOSS, Medical Director, Harborview Medical Center: Over the many years that I have worked here, I have seen all too many scenarios where people present with cancer, or with advanced heart disease or lung disease or strokes, and they’d gone for many years without access to care. When there’s basic health care coverage, so many more doors are open.

SARAH VARNEY: Across the nation, hospitals in states that expanded Medicaid have recorded sharp declines in uninsured admissions — 30 percent in the first quarter of 2014, and 50 to 70 percent in the second quarter.

Unpaid hospital bills are expected to fall by $4.2 billion this year in states that allowed poor adults into Medicaid. In states that didn’t, the drop is expected to be $1.5 billion, mostly from people who bought private coverage in the new marketplaces.

Caroline Pearson tracks state Medicaid decisions at Avalere Health, a research and consulting company.

CAROLINE PEARSON, Avalere Health: When the law passed and the hospitals sort of signed on for these cuts, Medicaid expansion was expected to be mandatory in every state. Of course, that changed when the Supreme Court made Medicaid expansion optional, and the hospitals are really the ones that have been caught in the crosshairs of that decision.

SARAH VARNEY: Pearson says it’s a precarious time for hospitals because of the cuts for covering the uninsured that they agreed to when the Affordable Care Act was being debated.

CAROLINE PEARSON: Some of these hospitals may end up in the red as a result of failure to expand Medicaid. And those cuts grow each year, so it’s a problem that is going to get worse over time.

SARAH VARNEY: I’m here in Winchester, Virginia, in the Shenandoah Valley. The local hospital here is already beginning to feel those federal cuts. Unlike in Seattle, though, the percentage of uninsured residents has declined very little.

Virginia’s Republican-controlled legislature has rejected pleas by the state hospital association to expand Medicaid, and that’s left hospitals like Winchester Medical Center, run by Valley Health System, facing double jeopardy.

NURSE: You’re diabetic?

PATIENT: Yes.

NURSE: High blood pressure?

PATIENT: Yes.

NURSE: High cholesterol?

PATIENT: Yes.

SARAH VARNEY: In response to its own worsening finances, Valley Health laid off 28 people and is taking a hard look at costly services like its trauma center that treats people after car accidents and other serious injuries.

Mark Merrill is the CEO of Valley Health.

MARK MERRILL, CEO, Valley Health: That’s an expensive endeavor. And as these payment cuts continue to go, we have to evaluate, are these the types of programs, like the trauma, like behavioral health, that we can sustain? There is a need for those services certainly here, but if the reimbursement doesn’t justify the ability to sustain those, we have to evaluate whether or not we can continue these.

SARAH VARNEY: Merrill and other hospital executives say the divide between states expanding Medicaid and those that have not could lead to a new type of two-tiered system in U.S. hospitals — between those able to maintain robust services in states like Washington … and those like Virginia, sliding into greater financial uncertainty.

I’m Sarah Varney in Winchester, Virginia, for the “PBS NewsHour.”


Editor’s Note: The first map in this segment illustrating states that expanded Medicaid under the Affordable Care Act (as of December 2014) did not include Minnesota. That state did, in fact, expand its program.

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