Health Care

Ray Carter | September 19, 2019

Officials say Medicaid harms hospital finances, then seek its expansion anyway

Ray Carter

Hospital officials urged members of the bicameral Healthcare Working Group to add up to 628,000 able-bodied adults to Oklahoma’s Medicaid program, even though they said they lose money serving Medicaid patients, the program does not guarantee patients access to treatment, and Medicaid effectively raises the cost of private insurance.

While Medicaid expansion was touted during the working group’s Wednesday meeting as a way to aid rural hospitals, witnesses repeatedly conceded that Medicaid is a significant cause of financial stress at those hospitals.

“Typically, when you’re managing the business side of a hospital, you’re really seeking to get commercial payers to your hospital,” said Jay Johnson, president and CEO of Duncan Regional Hospital.

He said private insurance pays “exponentially more” than government programs, “and that’s how hospitals make their profit.”

“On every government payer, we don’t make a profit,” Johnson said. “At our hospital, whether we’re taking a Medicare or Medicaid patient, our expenses are greater than what we will get paid.”

At Duncan Regional, he said just 28 percent of patients have private insurance.

“The way to translate that is 28 percent we can make a profit on,” Johnson said.

Johnson, who is also chairman of the Oklahoma Hospital Association’s executive committee, said programs like Medicaid create a “hidden tax” on other citizens.

“The hidden tax is that all of us that have commercial insurance pay exponentially more because our government programs don’t pay enough for us to break even,” Johnson said.

Chuck Spicer, president and CEO of OU Medicine, conceded that Medicaid coverage does not guarantee recipients access to treatment.

“Primary care access is good if you’ve got Blue Cross,” Spicer said. “It’s not good if you have Medicare, Medicaid, or self-pay. Physicians will limit their counts for how many Medicare, Medicaid patients they will take.”

At one point, Spicer said OU Medicine sees pregnant women every week who have obtained no prenatal care and their babies then spend weeks in intensive care because of preventable complications. He cited such cases as a reason to expand Medicaid, saying the taxpayer cost of prenatal doctor visits is less than the cost of intensive care.

But Rep. Harold Wright, R-Weatherford, noted the woman in Spicer’s story “would have been eligible for Medicaid” today in Oklahoma.

Spicer conceded Wright’s point: “She would have been eligible for Medicaid.”

Spicer added that “access to a physician” was likely a challenge for that woman, not “eligibility for Medicaid.”

“If you don’t have a doctor that will take a Medicaid patient in their office, even if you’re eligible, you don’t have access to care,” Spicer said.

While Oklahoma increased Medicaid provider payments this year, the rates are still lower than in 2010, Johnson said. That was one of several instances during the meeting where officials acknowledged that Oklahoma struggles to fund the existing Medicaid program.

Wright said doctors in his district are “talking about limiting their practice,” while others are discontinuing their Medicaid practice. If uninsured Oklahomans who are already Medicaid-eligible choose not to use the program, and if doctors limit their exposure to Medicaid because of its low rates, “how is increasing the Medicaid (program), expanding Medicaid, going to help in that area?” Wright asked.

In 2017, Johnson said the average operating margin for a rural hospital in Oklahoma was negative 4.3 percent. Rural hospital losses have increased in recent years, in part because the federal Affordable Care Act cut Medicare rates, he said.

“On average, Oklahoma rural hospitals are not making a profit,” Johnson said.

However, that does not appear to be the case at Duncan Regional Hospital. Based on a public filing, Duncan Regional's total profit (revenue minus expenses) was $8.4 million in 2016, the most recent year available. That was an increase of 50 percent compared to the $5.6 million in profit the 1889 Institute found for Duncan Regional when it reviewed the hospital’s financial data two years ago.

Officials indicated hospitals in Texas are in better shape than Oklahoma even though Texas has not expanded Medicaid and has a higher rate of uninsured citizens.

“Texas is the highest uninsured in the United States,” Spicer said. “They also have the highest insured population in the states because of the economy.”

Proponents of Medicaid expansion note federal law currently offers $9 in federal funding for every $1 in state spending on Medicaid expansion. But, since the federal government has previously failed to provide promised funding or reduced the amount provided for other programs, working group members asked hospital officials if they thought it financially wise to bank on the promised federal match for Medicaid expansion.

“If we wake up five years from now and we have banked the services that we have built for this population that we’re talking about adding, and that match goes from nine-to-one to five-to-one, what will we do then?” asked Sen. Marty Quinn, R-Claremore.

“Well, five-to-one is still five-to-one,” Spicer said.

Quinn noted that a reduction in the federal match could force the state to come up with hundreds of millions in new funding, and also said lawmakers may struggle to fund even the current nine-to-one match.

“Where does that money come from?” Quinn asked. “First of all, we don’t have a funding source. To my knowledge, we don’t have a funding source to give you the one-to-nine match. So if that match is reduced, where does the funding come from?”

Hospital officials said funding for the state’s share of expansion costs may come from diverting funds from the Department of Health.

Ray Carter Director, Center for Independent Journalism

Ray Carter

Director, Center for Independent Journalism

Ray Carter is the director of OCPA’s Center for Independent Journalism. He has two decades of experience in journalism and communications. He previously served as senior Capitol reporter for The Journal Record, media director for the Oklahoma House of Representatives, and chief editorial writer at The Oklahoman. As a reporter for The Journal Record, Carter received 12 Carl Rogan Awards in four years—including awards for investigative reporting, general news reporting, feature writing, spot news reporting, business reporting, and sports reporting. While at The Oklahoman, he was the recipient of several awards, including first place in the editorial writing category of the Associated Press/Oklahoma News Executives Carl Rogan Memorial News Excellence Competition for an editorial on the history of racism in the Oklahoma legislature.

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