Highlight on Pennsylvania: Hospitals Suffering While Governor Digs in His Heels with the Feds Over Medicaid Expansion

Although Pennsylvania Governor Tom Corbett announced last fall that he changed his mind and now plans to expand the state’s Medicaid program, he now claims that he’s getting close to his “breaking point” over the Obama administration’s apparent resistance to his plan to use billions of federal Medicaid expansion dollars to subsidize private health insurance policies.

Pennsylvania did not initially expand Medicaid eligibility as part of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), but last fall, Governor Corbett outlined a plan that includes offering Medicaid to more Pennsylvanians by using private health insurance plans and instituting new requirements for all Medicaid enrollees. Under his plan, Medicaid beneficiaries would have to pay monthly premiums and demonstrate they are searching for jobs.

Governor Corbett’s plan seeks to change Medicaid expansion under the 2010 federal health care law more than any other state. That includes waiving Medicaid’s consumer protection rules on benefits and networks for the private insurance plans funded by expansion dollars. The plan must pass the state legislature and also win approval from the federal government, but it’s meeting with resistance.

Governor Corbett is unhappy with the lack of progress. “Frankly, I’m starting to feel like a yo-yo,” Corbett said after he addressed a conference of health care professionals organized by the state Department of Health, “Right now, the road is getting bumpier rather than smoother. … I am getting to my breaking point.”

With the lack of progress being made by the Governor, hospitals are paying the price, literally and figuratively. Medicaid payment cuts and uncompensated care are hitting hospitals in Pennsylvania hard, putting hospital jobs, services, and capital projects at risk, according to recent data from the Pennsylvania Department of Labor & Industry and a recent survey conducted by the Hospital & Healthsystem Association of Pennsylvania (HAP).  As many as two-thirds of hospitals in the state have instituted hiring freezes, while close to half of them have laid off staff, half have delayed capital projects and more than 40 percent have cut services.

“Pennsylvania hospitals confront a changing and uncertain healthcare environment, mounting federal payment cuts and an economy that is still struggling,” said HAP Chief Executive Officer Andy Carter. “As hospitals work to transform the delivery system, they need stability in federal Medicare and Medicaid payments in order to make needed improvements without jeopardizing Pennsylvanians’ access to healthcare.”

Hospitals have felt the burn for some time as they’ve been hit with waves of federal budgetary actions which have reduced hospital payments since 2010. According to the HAP report, by the end of 2014, Pennsylvania hospitals will have had their Medicare payments cut by about $800 million. And the outlook is grim. Pennsylvania hospitals are expected to lose nearly $10 billion over the next decade.  And things will get worse if two Medicare policies, the Medicare-Dependent Small Rural Hospital program and Low-Volume Hospital Adjustment, which are crucial to the fiscal viability of Pennsylvania’s rural hospitals, are allowed to expire on March 31, 2014.

Carter urged Congress to keep the policies from expiring and asked that Congress extend support for rural hospitals. “Hospitals simply cannot afford any more payment reductions,” said Carter, “We urge state lawmakers to preserve and protect hospital payments in the upcoming budget,” said Carter. He also called on the federal government to approve Pennsylvania’s Healthy PA waiver to increase access to health insurance for low-income, uninsured Pennsylvanians.