Hospitals in this state can afford to pay a $90 million assessment

You’ve heard the saying, “It’s as sure as death and taxes.” Well, perhaps it’s time to put a 21st Century spin on that cliché - “It’s as sure as death, taxes and a Medicaid deficit.” For the better part of this decade, Mississippi has experienced deficits in its Medicaid program – sometimes as the result of unforeseen events, but most of the time as the result of intentional underfunding.
Until State Fiscal Year 2006, hospitals, more specifically, government funded public hospitals, paid an additional $90 million into the Medicaid program. When this non-federal money was matched with federal money, the $90 million generated $360 million for the Medicaid program. When the federal government disallowed this funding methodology, it left the State with a hole in the Medicaid program. This recurring hole has been filled with one time money for the last four fiscal years. There is no more one-time money. Given the downturn in the economy, resulting in increases in service utilization and in the number of beneficiaries, costs for the Medicaid program are projected to increase dramatically. Although the State is realizing a savings because of the federal stimulus money, the money is not enough to fill the void. The State must find additional non-federal money to fund the program.
A hospital assessment is not a new concept; other states have recently enacted provider assessments to help generate the revenue necessary to fund the non-federal share of its Medicaid program. Recently, Colorado, with the support of a Democratic Governor and the Colorado Hospital Association, passed a $600 million assessment on hospitals. Colorado’s relatively low match rate means that the assessment is expected to generate about $1.2 billion total dollars for healthcare providers. A 2 to 1 benefit overall. Wisconsin and Illinois, with support from their state hospital associations and Democratic governors, have also recently passed hospital assessments. The Illinois assessment is a $900 million assessment.
In Mississippi, we can’t pay for the program we currently have. A $90 million assessment would generate nearly $600 million in total program dollars for Mississippi providers – a 6 to 1 overall benefit – with a $5 net gain. The assessment is not a partisan issue; it simply makes good sense by promoting sound fiscal policy.
Some will call this a tax on sick people. For the last four years, hospitals have benefited from not having to pay the $90 million that was paid for the previous thirteen years. That’s a savings of $360 million over the last four years. If you’ve gone into a hospital during the last four years, you may have noticed that these savings were not passed along to patients. The cost of hospital services has continued to increase – hospitals can’t attribute that to a $90 million assessment.
Hospitals in Mississippi are reimbursed very well for treating Medicaid patients. On average, Medicaid reimburses hospitals 123% of their costs of treating Medicaid patients. None of the three states mentioned above (Colorado, Wisconsin or Illinois) pay their hospitals as well as Mississippi – yet Mississippi is one of the poorest states in the nation. In FY 2009, Mississippi hospitals will earn a profit off Medicaid of $194 million – excluding a Disproportionate Share Hospital (DSH) payment of $202 million.
To be fair, hospitals do pay an assessment to the Division of Medicaid. For State Fiscal Year 2010, hospitals are estimated to contribute approximately $14 million in assessments to fund medical service payments. Hospitals will receive approximately $1.5 billion in total payments from Medicaid. Again, even considering the net effect of these assessments, Medicaid still reimbursed hospitals, on average, at 123% of their Medicaid costs in FY 2009. As a percentage, hospital assessments amount to 2% of their Medicaid medical services revenue. By comparison, nursing homes contribute approximately $90 million in assessments – approximately 8% of their total Medicaid medical services revenue.
Not only can hospitals afford to pay this assessment, it is imperative that they do so. Based on calculations by Families USA using the old federal match rate, without the additional $90 million from hospitals there will be an adverse impact on business activity in the state by at least $550 million and a negative impact of over 5,600 jobs and $197 million in salaries and wages. Our economy currently needs these wages and jobs. With the enhanced match rate, the impact is even more pronounced. It is fiscally irresponsible not to reinstate the hospital assessment in order to avoid disastrous consequences to the State’s economy. When faced with a $90 million shortfall last year, the Division of Medicaid proposed reimbursement changes which maximized the UPL contributions from hospitals in order to harness additional non-federal funds and avoid a disastrous loss of total program dollars.
The bottom line is that hospitals in this state can afford to pay a $90 million assessment. It is not a tax on sick people any more than the $360 million hospitals saved the last four years was a tax refund to patients; it is good policy enacted by many other states and Mississippi needs the stability that such a revenue source would bring.