Patients, insurers to pay more

Rate-setting panel cuts hospitals' share of $123 million Medicaid shortfall

  • Listening to health care advocate Glenn E. Schneider, right with back to camera, testify before the Health Services Cost Review Commission are, from left, Chairman Donald A. Young, Executive Director Robert Murray and Commissioner Herbert S. Wong.
Listening to health care advocate Glenn E. Schneider, right… (Baltimore Sun photo by Amy…)
April 07, 2010|By Jamie Smith Hopkins |

Maryland's hospital rate-setting authority voted Tuesday to make patients and insurance companies shoulder most of $123 million in Medicaid expenses that the budget-strapped state can't cover.

That will hit insurers, self-insured employers and the uninsured starting in July, when the next fiscal year begins. Eventually, insurers said, the costs will show up in health insurance premiums that employers and workers pay. The increase of about three-quarters of 1 percent will add about $110 to the average hospital bill of $11,500, but the bottom-line effect on premiums is unclear.

Gov. Martin O'Malley's spending plan for fiscal year 2011 would balance the budget in part by shifting $123 million in Medicaid expenses - part of the state's share of the federal insurance program for the poor - to other pocketbooks. That left the Health Services Cost Review Commission, which sets the rates that hospitals charge and everyone must pay, with the job of figuring how to distribute the pain.

The commissioners decided Tuesday to make the paying public responsible for 70 percent and have hospitals pay the rest out of their operating budgets. That's a reversal from last month, when the body voted to divide the extra costs 50-50. Hospitals, which wanted patients and insurers to pick up the full amount, lobbied heavily for a second vote, arguing that they weren't given time to respond.

"We are pleased with the commission's movement," Carmela Coyle, chief executive of the Maryland Hospital Association, said after the Tuesday meeting. "We would have preferred to see all of the needed Medicaid shortfall built into rates, but I think we saw an important step in the right direction today."

Operating margins at Maryland hospitals are "razor thin," Coyle said during the hearing. She said the February snowstorms cost hospitals about $68 million, most of which won't be covered by federal disaster aid. An extra hit of more than $60 million - half the Medicaid shortfall - would probably force hospitals to cut about 1,000 jobs, she said.

"We really need your help," said Robert A. Chrencik, chief executive of the University of Maryland Medical System, who testified alongside the heads of the Johns Hopkins Health System and MedStar Health.

Insurers and health care advocates came out in support of the commission's original decision, arguing that the 50-50 split was the fairest option at a time when everyone is financially pinched. That's how the commission passed on $35 million in Medicaid expenses the state needed to get off its books during the current fiscal year.

The state budget for the fiscal year beginning July 1 hasn't been approved, but legislators are deliberating with the assumption that the state will be able to save $123 million by passing it on to hospitals or ratepayers.

"We need to be able to share the burden," said Glenn E. Schneider, a board member with the Maryland Health Care for All! Coalition. "We know that hospital margins are tight. The margins of all the groups that purchase health care are tighter than normal, too."

Howard County Health Officer Peter L. Beilenson, chairman of the Healthy Howard Health Plan, said he's seen "a significant increase" in the number of members who can no longer afford the plan's current fees, which range from $50 to $85 per person a month. The plan is the county's attempt to cover uninsured residents and provide universal coverage, and it would have to cover the higher hospital rates. Even a small bump in the plan's rates would hurt, he said.

Health care consultant Hal Cohen, representing insurers CareFirst BlueCross BlueShield and Kaiser Permanente, said they saw the 50-50 split as a reasonable compromise and urged the commission not to change its mind.

But Kevin J. Sexton, vice chairman of the commission and chief executive of Holy Cross Hospital in Silver Spring, said a 70-30 split - which the commission's staff recommended - seemed the best of the "crummy choices" available. That spreads the tab more broadly so it doesn't have an outsized effect on hospitals and their employees, he said.

"What we're really pondering is, 'Who's going to be hurt and how much?' " Sexton said.

All five of the commissioners present voted in favor of a 70-30 split.

The federal government, through Medicaid and Medicare, is on the hook for the biggest share - about $44 million - because those programs pay hospital rates. CareFirst, the state's largest insurer, will be responsible for $16 million.

Schneider, with the Health Care for All! Coalition, said political leaders ought to have handled the budget problem themselves rather than shunting it off to the commission as a "hidden tax."

"We shouldn't even be here talking about this," he said.

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