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The GOP Pulls Off the Medicaid Band-Aid. Ouch.

A con­se­quence of last year’s Supreme Court rul­ing that upheld Oba­macare — but allowed states to opt out of the Med­ic­aid expan­sion — is that we would see GOP state gov­er­nors placed in a real dilem­ma: They could either accept the Med­ic­aid expan­sion and receive bil­lions of dol­lars for their state health care sys­tems from the Fed­er­al gov­ern­ment at the risk of enrag­ing their far-right base of sup­port­ers. OR the gov­er­nors could reject the Med­ic­aid expan­sion, leav­ing mil­lions with­out cov­er­age but still being able to say they stood up to that evil social­ist plot to destroy Amer­i­ca. Deci­sions, deci­sions... [1]:

Talk­ing Points Memo
What The ‘Oba­macare’ Deci­sion Means For Med­ic­aid
Sahil Kapur June 28, 2012, 4:58 PM

In a sur­prise move in its deci­sion to uphold the ‘Oba­macare’ man­date, the Supreme Court declared that states may opt out of the law’s Med­ic­aid expan­sion with­out los­ing all fed­er­al funds for the pro­gram.

“In the 47 year his­to­ry of the pro­gram, there has nev­er been a suc­cess­ful chal­lenge to any of the Med­ic­aid expan­sions, so this was rather unusu­al,” said Ron Pol­lack, direc­tor of the con­sumer group Fam­i­lies USA.

The deci­sion is expect­ed to at least slow down imple­men­ta­tion of the new Med­ic­aid pro­vi­sions. If states refuse to par­tic­i­pate en masse, it could lead to sig­nif­i­cant­ly few­er peo­ple than the pro­ject­ed 17 mil­lion being cov­ered under the Med­ic­aid expan­sion.

The Supreme Court held that the Med­ic­aid expan­sion in itself con­sti­tu­tion­al. But it essen­tial­ly decreed it a new pro­gram, which means states can­not be pun­ished for turn­ing it down. The court reject­ed the Oba­ma administration’s argu­ment that states must accept the expan­sion or risk los­ing all fed­er­al Med­ic­aid funds.

“The prac­ti­cal effect is that it will make the Med­ic­aid expan­sions go more slow­ly,” said Sara Rosen­baum, a pro­fes­sor of health law at George Wash­ing­ton Uni­ver­si­ty. She added that it may be left to future courts to deter­mine which parts of the Med­ic­aid expan­sion count as a new pro­gram and which parts are mere­ly addi­tions to the exist­ing one.

Repub­li­can gov­er­nors will face pres­sure to reject the Med­ic­aid expan­sion or risk being accused by con­ser­v­a­tives of will­ing­ly embrac­ing a big part of ‘Oba­macare.’ But there’s an incen­tive in the oth­er direc­tion; name­ly: a huge cash gift from the fed­er­al gov­ern­ment, which cov­ers the full cost of the first three years of expan­sion.

...

One of the prob­lems with not accept­ing the Med­ic­aid expan­sion is that a key assump­tion behind the cost-cut­ting in Oba­macare cen­ters around the idea that Med­ic­aid receipts to hos­pi­tals would go down per patient but there would be more peo­ple cov­ered by Med­ic­aid over­all. Hos­pi­tals could make up the low­er per-patient rev­enue with high­er vol­umes. In the states that don’t expand their Med­ic­aid cov­er­age, how­ev­er, the hos­pi­tals will still get paid less per Med­ic­aid patient but they won’t get the increased vol­ume of patients due to the increased cov­er­age. So it isn’t just unin­sured poor peo­ple that are in the cross-hairs of this fight. The hos­pi­tals get hurt too, along with their staff and patients. Non-prof­it hos­pi­tals that serve large num­bers of Med­ic­aid patients will be espe­cial­ly hurt [2]:

Bloomberg
Hos­pi­tals Pre­pare to Cut Care in Med­ic­aid Opt-Out States
By Stephanie Armour — May 14, 2013 12:06 PM CT

With 15 U.S. states opt­ing out of Pres­i­dent Barack Obama’s Med­ic­aid expan­sion, hos­pi­tals that treat poor and unin­sured patients are ask­ing the gov­ern­ment to delay $64 bil­lion in planned fund­ing cuts.

Med­ic­aid funds to hos­pi­tals with a dis­pro­por­tion­ate share of low-income patients will be cut 50 per­cent, or $14.1 bil­lion, from fis­cal 2014 through 2019, accord­ing to draft reg­u­la­tions to be pub­lished in the Fed­er­al Reg­is­ter tomor­row. The Amer­i­can Hos­pi­tal Asso­ci­a­tion wants to delay by two years the start of the cuts for Med­ic­aid and for $49.9 bil­lion in reduc­tions by Medicare, the health pro­gram for the elder­ly and dis­abled.

“They decid­ed not to look at the effect of health care reform,” Tom Nick­els, senior vice pres­i­dent for fed­er­al rela­tions in Wash­ing­ton for the hos­pi­tal asso­ci­a­tion, said in a tele­phone inter­view today. “They don’t penal­ize states that have cho­sen not to expand.”

The reduc­tions are man­dat­ed by Pres­i­dent Barack Obama’s Afford­able Care Act, and were sup­posed to be off­set by an increase in the num­ber of patients who would gain insur­ance through an expan­sion of state Med­ic­aid pro­grams. With some Repub­li­can-led states decid­ing not to coop­er­ate, a loss of fund­ing with­out a gain in more insured patients would ham­per hos­pi­tals abil­i­ty to keep car­ing for under­served pop­u­la­tions.

“It’s a kick in the gut,” said John Blu­ford, chief exec­u­tive offi­cer of Tru­man Med­ical Cen­ters in Kansas City, Mis­souri, which esti­mates it may lose as much as $150 mil­lion in Med­ic­aid pay­ments over sev­en years. “These are real dol­lars. It would wipe out our mar­gins.”

Tenet Prof­it

The rules being cir­cu­lat­ed this week show Med­ic­aid would reduce the so-called DSH pay­ments by $500 mil­lion in the fis­cal 2014 year start­ing in Octo­ber. For 2015, $600 mil­lion more would be cut with the annu­al reduc­tions reach­ing $5.6 bil­lion in 2019.

For the first two years, the fund­ing cuts won’t be based on whether states have opt­ed to expand Med­ic­aid. Tenet Health­care Corp. (THC), the third-largest for-prof­it hos­pi­tal chain in the U.S., esti­mat­ed in Feb­ru­ary the Med­ic­aid and Medicare cuts would cost it $35 mil­lion in gov­ern­ment pay­ments in the fourth quar­ter. Dal­las-based Tenet has 26 per­cent of its beds in Flori­da and 20 per­cent in Texas, both states where the Repub­li­can gov­er­nors have opt­ed not to expand Med­ic­aid.

HCA Hold­ings Inc. (HCA), the largest for-prof­it U.S. hos­pi­tal chain, has 25 per­cent of its beds in Texas and 25 per­cent in Flori­da, accord­ing to said Bri­an Tan­quilut, an ana­lyst at Jef­feries LLC in Los Ange­les.

Sav­ing Grace

For-prof­it hos­pi­tals like Tenet are unlike­ly to pass along the costs of the cuts to con­sumers in the way of rais­ing rates to non-gov­ern­ment pay­ers, Tan­quilut said. “They’ll eat it.”

Cuts in the Medicare DSH pay­ments also will be off­set by a sep­a­rate April 26 reg­u­la­to­ry pro­pos­al that would lead to a 0.8 per­cent net raise in over­all Medicare pay­ments for ser­vices that elder­ly and dis­abled patients get after being admit­ted to hos­pi­tals, Tan­quilut said by tele­phone.

The over­all Medicare rate — which includes the Medicare cuts to hos­pi­tals that treat a large num­ber of low-income patients — should keep HCA’s earn­ings before inter­est, tax­es and amor­ti­za­tion expens­es with­in its Feb­ru­ary 2013 guid­ance, R. Mil­ton John­son, pres­i­dent and chief finan­cial offi­cer, said on an April con­fer­ence call with investors.

The sav­ing grace for for-prof­it hos­pi­tals, Tan­quilut said, is that the Afford­able Care Act will bring finan­cial ben­e­fits that non­prof­it and pub­lic hos­pi­tals like Tru­man Med­ical won’t see. Large, urban hos­pi­tals that pro­vide the biggest share of char­i­ty care and treat more Med­ic­aid patients are most at risk, Moody’s Investors Ser­vice Inc. said in a March 14 report.

Tight Bind

With only about one-fifth of their patients hav­ing com­mer­cial insur­ance, these safe­ty-net hos­pi­tals typ­i­cal­ly have prof­it mar­gins of about 2.3 per­cent, a third of the indus­try­wide aver­age for all hos­pi­tals, accord­ing to 2010 data from the Nation­al Asso­ci­a­tion of Pub­lic Hos­pi­tals and Health Sys­tems. Los­ing Med­ic­aid fund­ing and not gain­ing more insured patients would swing that mar­gin from a prof­it to a loss of 6.1 per­cent.

Hos­pi­tals may try to recoup loss­es by lim­it­ing the amount of care they pro­vide to the unin­sured or reduc­ing staff, John Graves, an assis­tant pro­fes­sor at the Van­der­bilt Uni­ver­si­ty School of Med­i­cine in Nashville, Ten­nessee, said by tele­phone.

“They’re in a tight bind,” Graves said. “They have to recoup those loss­es through few­er ser­vices, shut­ting down.”

...

Death By A Thou­sand Cuts Indi­rect Hostage-Tak­ing

To the sur­prise of many, the Oba­ma admin­is­tra­tion called for a delay in the Med­ic­aid cuts for states that opt-out of the expan­sion [3]. So are the hos­pi­tals out of the dan­ger zone? Well....another pre­dictable con­se­quence of all this is that, giv­en the choice to expand health­care cov­er­age for poor peo­ple vs stick­ing it to Oba­ma, stick­ing it to Oba­ma was going to be a clear win­ner in a lot of states. What was­n’t obvi­ous, how­ev­er, was that the GOP might be will­ing to shut down the Fed­er­al gov­ern­ment in order to stop Oba­macare’s imple­men­ta­tion. Grant­ed, they were most like­ly going to threat­en to shut down the gov­ern­ment over some­thing, but lim­it­ing health­care access to poor peo­ple was nev­er the obvi­ous play from the GOP’s play­book [4]:

Talk­ing Points Memo
Con­ser­v­a­tives Step Up Push To Under­cut GOP On Oba­macare
Sahil Kapur Sep­tem­ber 13, 2013, 6:00 PM

Oba­macare is becom­ing a huge headache for the Repub­li­can Par­ty.

Con­ser­v­a­tive advo­ca­cy groups are ral­ly­ing behind House leg­is­la­tion backed by 43 Repub­li­cans [5] to threat­en a gov­ern­ment shut­down unless Oba­macare is defund­ed, under­cut­ting GOP lead­ers’ efforts to lock in low spend­ing lev­els [6] by goad­ing the par­ty into a self-defeat­ing con­fronta­tion.

With­in 24 hours of its Thurs­day release, Sen. Mike Lee (R‑UT) threw his sup­port behind the bill, as did the well-fund­ed groups Club For Growth, Free­dom­Works and Her­itage Action.

“The Club for Growth strong­ly sup­ports the leg­is­la­tion offered by Con­gress­man Tom Graves to save Amer­i­ca from Oba­macare,” said Chris Choco­la, the group’s pres­i­dent, boast­ing that “momen­tum is build­ing” to stop the health care reform law.

House GOP lead­ers, who have few votes to spare, are deter­mined to pass their pro­pos­al to con­tin­ue spend­ing at seques­tra­tion lev­els and force a Sen­ate vote to defund Oba­macare with­out risk­ing a shut­down. House lead­er­ship is open to tweak­ing the specifics but they want to achieve three goals: con­tin­ue the sequester, give Sen­ate Repub­li­cans a chance to fight Oba­macare and main­tain lever­age against the health care going into the debt lim­it fight. The 43 Repub­li­cans behind the Graves bill haven’t implic­it­ly com­mit­ted to oppos­ing lead­ers’ ver­sion.

...

Con­ser­v­a­tives, mean­while, are under­cut­ting — and infu­ri­at­ing — Repub­li­can lead­ers who want to be prag­mat­ic about what they can achieve in the con­tin­u­ing res­o­lu­tion. Democ­rats, they rec­og­nize, are vul­ner­a­ble on spend­ing lev­els but won’t cave [6] on Oba­macare. As a result, if the hard right’s desires get in the way of reaf­firm­ing seques­tra­tion cuts (even tem­porar­i­ly), the GOP may lose on all fronts. Vet­er­an Repub­li­cans real­ize the par­ty out of pow­er will be blamed if the gov­ern­ment shuts down, and their nego­ti­at­ing hand weak­ened over how much it should spend upon re-open­ing.

The con­ser­v­a­tive oppo­si­tion to Oba­macare has become unap­peasable and it’s tear­ing the GOP apart. The base is anx­ious to make a stand now because imple­men­ta­tion of the law is set to accel­er­ate on Oct. 1 and its major com­po­nents poised to take effect on Jan. 1. Advo­cates pri­vate­ly gloat about their chances of stick­ing it to GOP lead­ers as they mobi­lize in favor of a stand­off. Stare down Pres­i­dent Barack Oba­ma until he blinks on his own sig­na­ture achieve­ment, they demand of the GOP, even if it means shut­ting down the gov­ern­ment. But Repub­li­can lead­ers aren’t opti­mistic that he’ll blink, and wor­ry that ini­ti­at­ing this bat­tle could dam­age their already weak brand and threat­en their oth­er­wise secure House major­i­ty.

The House GOP lead­er­ship pro­pos­al entails a two-pronged bill to fund the gov­ern­ment until Dec. 15 at seques­tra­tion lev­els and force the Sen­ate to vote on defund­ing Oba­macare. The Sen­ate can reject the Oba­macare com­po­nent, as is expect­ed, and send the rest of the con­tin­u­ing res­o­lu­tion straight to the president’s desk.

Repub­li­can lead­ers ten­ta­tive­ly plan on bring­ing up a stop­gap mea­sure next week, and aides main­tain an air of con­fi­dence about suc­cess. They face a tough road to secur­ing the votes for just about any bill to keep the gov­ern­ment open. Will they suc­ceed?

“That remains to be seen,” said a House GOP lead­er­ship aide.

The lat­est pro­pos­al by House Major­i­ty Whip Eric Can­tor to threat­en a default on the US debt in place of a gov­ern­ment shut­down threat is anoth­er very non-obvi­ous play for the GOP to call at this point. It’s not actu­al­ly all that out of char­ac­ter for the GOP [7], but threat­en­ing to default on the nation­al debt unless we all agree to keep lim­it­ing health care to the poor isn’t the obvi­ous best move for the GOP in this sit­u­a­tion. Every­one is used to a lit­tle zealotry for the GOP at this point but this just might be anoth­er over­reach [8]:

TPMDC
Can­tor: If We Can’t Defund Oba­macare, Let’s Delay It
Sahil Kapur Sep­tem­ber 12, 2013, 10:40 AM

In order to per­suade con­ser­v­a­tives law­mak­ers to vote to keep the fed­er­al gov­ern­ment fund­ed past Sept. 30, House Repub­li­can lead­ers are propos­ing to stare down Pres­i­dent Barack Oba­ma over the debt ceil­ing by seek­ing a one-year delay of Oba­macare.

At a closed-door meet­ing Tues­day, House Major­i­ty Leader Eric Can­tor (R‑VA) float­ed [9] a strat­e­gy [10] to delay the roll­out of Oba­macare for one year in exchange for lift­ing the debt ceil­ing. The meet­ing was focused on pitch­ing a plan that lets Repub­li­cans vote to defund Oba­macare with­out risk­ing a gov­ern­ment shut­down if the Sen­ate rejects the idea, a move that is meet­ing fierce resis­tance [11] on their right flank, which wants to go fur­ther.

A senior Repub­li­can aide famil­iar with Cantor’s remarks said he was essen­tial­ly try­ing to per­suade his mem­bers that the debt lim­it, which the fed­er­al gov­ern­ment is expect­ed to hit in mid-Octo­ber, pro­vides a bet­ter oppor­tu­ni­ty than a threat­ened gov­ern­ment shut­down to under­mine Oba­macare.

“He didn’t draw any red lines,” said the GOP aide. “He said it’s a bet­ter oppor­tu­ni­ty than [the con­tin­u­ing res­o­lu­tion] and a delay there is very doable.” The aide added that the con­ces­sion wouldn’t nec­es­sar­i­ly just involve Oba­macare; there could be oth­er reforms. The aide admit­ted that it depends in part on what the pres­i­dent is will­ing to give up.

It all sounds far-fetched. After all, trad­ing a gov­ern­ment shut­down for default would be like trad­ing a com­mon cold for can­cer. And it remains to be seen whether GOP lead­ers would let the econ­o­my col­lapse if they don’t get their way, or if they’re mere­ly say­ing what they have to say to get through the shut­down cri­sis.

An upside to propos­ing the debt ceil­ing idea now is that it helps per­suade Repub­li­can law­mak­ers not to with­hold their sup­port for keep­ing the gov­ern­ment open. Cantor’s sug­ges­tion this week comes as Repub­li­cans are tak­ing heavy fire from con­ser­v­a­tive advo­cates for refrain­ing from risk­ing a gov­ern­ment shut­down over Oba­macare. House lead­ers have post­poned con­sid­er­a­tion [12] of the con­tin­u­ing res­o­lu­tion until next week to build sup­port.

Last month, Speak­er John Boehn­er (R‑OH) float­ed the idea [13] of delay­ing or defund­ing the health care reform law in a debt ceil­ing pack­age. But he, too, stopped short of draw­ing any red lines. A lead­er­ship aide described it at the time as an “option.”

Despite the anti-Oba­macare fren­zy con­sum­ing their right flank, Repub­li­can lead­ers rec­og­nize that both a shut­down and default would be a dis­as­ter for their par­ty, poten­tial­ly threat­en­ing their House major­i­ty ahead of a mid-term elec­tion when they hope to win back the Sen­ate [14]. Their bal­anc­ing act to sat­is­fy con­ser­v­a­tives enough to avert a shut­down but not to cre­ate expec­ta­tions that threat­en­ing debt default is the way to go.

...

Then again, maybe this isn’t over­reach at all that we’re look­ing at. Maybe it’s real­ly an incred­i­bly sneaky plan to simul­ta­ne­ous­ly lim­it access to health­care for peo­ple (a core val­ue [15] held by much of the con­tem­po­rary GOP base) AND blame it all on Oba­macare. At least in some states...states that don’t accept the Med­ic­aid expan­sion. Because by threat­en­ing to shut­down the gov­ern­ment or default­ing on the debt over their oppo­si­tion to Oba­macare the GOP is still going to destroy the finances of hos­pi­tals in the states that refuse to accept the Med­ic­aid expan­sion. That’s because that delay in the Med­ic­aid cuts that the Oba­ma admin­is­tra­tion agreed to in May [3] can’t actu­al­ly be imple­ment­ed until Con­gress pass­es a bud­get. Now all they have to do is ensure that the pub­lic blames all the hos­pi­tal clo­sures and health­care prob­lems that results from these cuts on Oba­macare and not the per­pet­u­al bud­get and health­care war­fare waged by the GOP which [16] should­n’t [17] be [18] too hard to do. If this was­n’t an acci­dent, it was kind of bril­liant. Except for the part about how the GOP has to explain shut­ting down the gov­ern­ment or default­ing on the nation­al debt. So it’s pos­si­ble that the GOP is oper­at­ing in “Mad Dog [19]” mode right now, and giv­en the larg­er debt bat­tles that are swirling around this issue, this is poten­tial­ly a much scari­er sto­ry about polit­i­cal­ly and ide­o­log­i­cal­ly-dri­ven attempts to restrict health care to poor peo­ple than sto­ries about polit­i­cal­ly and ide­o­log­i­cal­ly-dri­ven attempts to restrict health care to poor peo­ple nor­mal­ly are [20]:

TPM­Livewire
With­out New Bud­get, HHS Final­izes $1.1 Bil­lion in Med­ic­aid Hos­pi­tal Cuts
Dylan Scott 4:58 PM EDT, Fri­day Sep­tem­ber 13, 2013

Because a grid­locked Con­gress won’t be pass­ing a new bud­get any­time soon, the U.S. Depart­ment of Health and Human Ser­vices final­ized a rule Fri­day for $1.1 bil­lion in Med­ic­aid cuts to hos­pi­tals under the Afford­able Care Act, cuts that could hit hos­pi­tals par­tic­u­lar­ly hard in states that don’t expand Med­ic­aid through the law.

Pres­i­dent Oba­ma pro­posed post­pon­ing the cuts one year in his FY 2014 bud­get because not every state is expand­ing Med­ic­aid as orig­i­nal­ly planned. The cuts, which are to pay­ments for hos­pi­tals that per­form a lot of uncom­pen­sat­ed care, were includ­ed in Oba­macare because the law would cov­er more peo­ple, decreas­ing the over­all amount of uncom­pen­sat­ed care.

The pres­i­den­t’s pro­pos­al reflect­ed the real­i­ty that 20-plus states have refused to expand Med­ic­aid cov­er­age under the health care reform law. If the cuts went into effect, hos­pi­tals in those non-expand­ing states would receive small­er reim­burse­ments from HHS with­out the com­pen­sato­ry expan­sion of cov­er­age.

But with­out a new bud­get from Con­gress, HHS was­n’t able to imple­ment the pres­i­den­t’s pro­pos­al.

“HHS has no flex­i­bil­i­ty to insti­tute a delay of the DSH allot­ment reduc­tions with­out con­gres­sion­al action,” the rule released Fri­day said.

...

For those [21] gov­er­nors [22] that still fear a dystopi­an world free of unin­sured poor peo­ple It might worth remind­ing them that there would still unin­sured peo­ple left in their states even if they accept it [23]. It’s a long shot, but it just might work.