Advocates pushing Kansas officials to expand Medicaid acknowledge it is unlikely they will achieve their goal this year.
But they said they remain hopeful they can convince Gov. Sam Brownback and legislators next year to make more Kansans eligible for the program.
“If it’s not going to happen the first year, we’ll continue to build grassroots support. We’re not giving up,” said Anna Lambertson, director of the Kansas Health Consumer Coalition, one of the groups pushing for expansion.
Medicaid, known in Kansas as KanCare, currently provides medical and long-term living assistance services for about 380,000 poor, disabled and elderly Kansans. Expansion could increase enrollment in the program by as many as 240,000, according to various projections.
The federal Affordable Care Act initially required states to expand Medicaid eligibility. However, the U.S. Supreme Court decision that upheld the law made expansion optional for states.
Expansion would have a bigger impact in Kansas than in many other states. That’s because the state’s current eligibility criteria exclude all but the poorest adults. Only those with children and incomes less than 32 percent of the federal poverty level — about $6,000 a year for a family of four — can qualify. Implementing expansion would mean that adults in that same family of four could make more than $31,000 a year and qualify.
The Brownback administration has estimated that expanding eligibility for the $3.2 billion program would cost the state an additional $600 million over 10 years.
Door still open
Whenever asked about expansion, Brownback says things that suggest he’s more likely to say “no” than “yes” to it. But advocates said they remain encouraged by the fact he hasn’t rejected the idea.
“If he’s really looking at the options with an open mind — as he himself has said he’s doing — then I see him taking his time (to decide) as beneficial,” Lambertson said. “I’d rather that he take his time than just say ‘no’.”
Last week, Brownback again expressed doubts that the federal government could afford to keep its promise to cover all the costs of expansion for the first three years and no less than 90 percent thereafter. Despite his misgivings, he said, he continues to have “active conversations” with expansion advocates and legislators on the topic.
“It’s in the legislative process,” Brownback said. “Expansion would have to be addressed by the Legislature. They would have to budget it.”
Brownback’s requirement that legislators budget for it before he would sign off on it has advocates convinced a decision won’t be made this year.
Members of the House-Senate conference committee negotiating a final version of the fiscal 2014-15 budgets are scheduled to return to the bargaining table early next month when the Legislature returns to Topeka for what leaders hope will be a brief wrap-up session.
A study released today by the Kansas Hospital Association says that expanding Medicaid eligibility to levels called for in the federal health reform law would pump more than $3 billion into the state’s economy and create 4,000 new jobs by 2020.
The study, done for the association by the Center for Health Policy Research at George Washington University and Regional Economic Models, Inc., also shows that expansion would save the state more than it would cost.
Tom Bell, the association’s chief executive, said the projected economic benefits were too significant to be ignored by Gov. Sam Brownback and legislative leaders as they consider whether or not to expand eligibility for the healthcare program that serves poor, elderly and disabled Kansans.
Brownback has been a vocal opponent of the Affordable Care Act but has not made a decision on Medicaid expansion, which was made optional for states as the result of last year’s U.S. Supreme Court decision upholding the law.
“I think from our perspective, it’s not unlike the state landing a huge federal contract,” Bell said.
The impact of the expansion on the Kansas economy could rival that of the National Bio and Agro-Defense Facility in Manhattan, Bell said.
“That’s the way we look at it, as an opportunity for our state,” he said.
Bigger impact in Kansas
Since Jan. 1 in Kansas, the Medicaid program has operated under the name of KanCare. Three health insurance companies are under contract with the state administer it.
The health reform law requires that the federal government cover state costs of expanding Medicaid for three years. After that, the federal share would recede gradually until it reaches 90 percent, where it would remain.
Currently, Kansas’ Medicaid eligibility criteria for adults are among the most restrictive in the nation. Only those with children are eligible and only then if they earn less than 32 percent of the Federal Poverty Level (FPF) — currently $5,900 a year for a family of four.
Because those numbers are so low, expanding Medicaid would have a bigger impact in Kansas than in many other states by making all Kansans who earn up to 133 percent of FPL — $30,660 for a family of four — eligible for the program.
Various estimates suggest that expansion could add between 226,000 and 240,000 Kansans to the 380,000 now enrolled in Medicaid.
Net benefit to the state
A Kansas Department of Health and Environment report released last week estimated Medicaid costs would climb by $513 million over 10 years regardless of whether the state expanded eligibility for the program. That’s because heightened attention surrounding the expansion issue is expected to prompt many people who already are eligible but not enrolled to sign up.
Covering only those who are made eligible by the expansion would cost another $600 million over 10 years, the KDHE report said. Even so, the hospital association report said that expanding Medicaid would produce a net savings to the state of $82 million from 2014 to 2020.
“That’s front loaded into those first three years, but it’s still a substantial net benefit,” Bell said.
Brownback has not ruled out expansion but neither has his administration shown much, if any, enthusiasm for the idea. Reacting to the KDHE cost estimate, Sherriene Jones-Sontag, the governor’s chief spokesperson, said expanding Medicaid would affect the state’s ability to fund other “core responsibilities.” The impact would be even greater “if the federal government fails to keep its promise to pay for its part of the expansion,” she said.
Bell said administrators at the association’s 126 member hospitals understand Brownback’s concerns, which are shared by many legislators. But he said they believe the Medicaid expansion dollars are needed to offset the anticipated loss of other federal funds that hospitals have used to cover the cost of caring for the uninsured.
“From an economic perspective for our members — especially those that treat a higher number of uninsured — they think it makes great sense to take a serious look this and see if we can make it work,” Bell said.
Many Kansas hospital officials say they are worried that if state policymakers choose not to expand eligibility for the state’s Medicaid program, the hospitals will see a significant drop in the money they receive to help care for patients who can’t or won’t pay their medical bills.
Currently, 64 of the state’s 127 hospitals divide about $51.3 million a year in what are called Medicaid disproportionate share payments.
They use the money, a mix of federal and state dollars, to offset some of the costs of caring for the uninsured.
“It’s a significant amount of funding for us,” said Bruce Witt, director of governmental relations at Via Christi Health in Wichita.
In the current fiscal year, Via Christi Health is expected to receive almost $13 million from the disproportionate share payments, the most of any health care provider in the state.
Under the Affordable Care Act, also known as Obamacare, those payments are to be significantly reduced, starting in October.
“We’re being told that ‘disproportionate share’ won’t be completely phased out, but that roughly 50 percent will be going away,” said Tom Bell, chief executive of the Kansas Hospital Association. “It may end up being somewhere between 50 and 75 percent. We don’t know at this point.”
Though Via Christi could expect to lose the most dollars, the smaller, rural hospitals likely would be the hardest hit proportionately based on an analysis done for the KHI News Service by its parent organization, the Kansas Health Institute. The analysis calculated the likely revenue hit on each Kansas hospital based on recent payment histories, bed counts and inpatient stays.
State option on Medicaid
The law’s design, Bell said, preceded the U.S. Supreme Court’s June 28, 2012 ruling that gives states the option of choosing to not expand their Medicaid coverage to include non-disabled, childless adults whose incomes fall below 133 percent of the federal poverty level.
Since the ruling, governors in at least 10 states – Alabama, Georgia, Idaho, Louisiana, Maine, Mississippi, South Carolina, South Dakota, Oklahoma, and Texas - have said they will not expand Medicaid eligibility.
“Our lieutenant governor is saying he’s not sure that DSH (disproportionate share) is going away because the (U.S.) Supreme Court has said the federal government can’t penalize states for not going along with the Medicaid expansion,” said Shawn Rossi, a vice president with the Mississippi Hospital Association.
“We don’t know if that’s a correct assumption,” Rossi said, “but we are for sure telling our legislators that if DSH goes away, we’re definitely going to need something to take its place. We see a very large number of people who are uninsured.”
Brownback looking it over
Kansas’ Gov. Sam Brownback has been an outspoken opponent of the Affordable Care Act, has not yet decided whether to implement the Medicaid expansion.
KIOWA — Construction on a new $8.2 million hospital is scheduled to begin early next year in this small, south-central Kansas community.
The project is in response to conditions common in many parts of rural Kansas where an increasingly aging population often is treated in outdated hospital facilities.
A quarter of Kiowa's approximately 1,000 residents are age 65 or older, more than half the town is at least 45 years old, and 80 percent of the critical access hospital's business is from Medicare patients, said Alden Vandeveer, chief executive of the Kiowa District Hospital.
"It's definitely an aging population and we are going to need in the future some pretty good resources for the seniors," he said. "The (hospital) board is real interested in making sure we have the facilities and equipment to serve the community, that the people here have what they need right here at home. We're 20 miles from anywhere."
The current hospital simply wasn't filling the community's needs, he said.
"For example, right now we have shared bathrooms — the old '50s-style bath at the end of the hall, two rooms share one toilet. And the toilet space is so small that if you have a heavy patient, they could get trapped in there — and we have 100-pound nurses who would have trouble getting them out," Vandeveer said.
The hospital's operating room "is unbelievably small — I've never seen one this small. It is the original O.R. — 61 years old," Vandeveer said. "It might be 200 square feet, if you're stretching it."
The new operating room will be 450 square feet, and the entire facility will be 25,500 square feet — about 40 percent larger than the existing hospital. In the new hospital, there will be eight rooms for patients, each equipped with a private restroom.
Hill-Burton era hospitals
Many rural hospitals were built with Hill-Burton Act funds in the 1940s and '50s, said Melissa Hungerford of the Kansas Hospital Association. The 1946 act, part of an initiative by President Harry Truman to improve the nation’s hospital capacity in the aftermath of World War II, provided grants and guaranteed loans for hospital construction.
The majority of Kansas’ 83 critical access hospitals might have been built during that era, Hungerford said, though an exact count is not available.
"There's only so far you can improve on those older structures," Hungerford said. "So many of them have added a wing, remodeled this, changed the front, done those kinds of things over the years. A lot of our hospitals are faced with not being able to just fix what they have. It makes sense that they have to address larger problems like wiring or fire safety."
The need for new wiring, fire sprinklers, accessibility for disabled patients, and sufficient space for modern health care equipment were all behind the construction project now underway at Medicine Lodge Memorial Hospital — another critical access facility 24 miles north of Kiowa — said administrator Kevin White.
Medicine Lodge is renovating half of the existing 36,000 square feet and adding on 17,000 square feet. Some of the new space is aimed at attracting part-time specialists who keep multiple offices around the region.
“We have some areas built in to make it a little more attractive to specialists, for them to have a place to come to for a clinic a day, a month or every two weeks. We had trouble getting that kind of participation,” with the space they have now, White said.
Given the recent recession, the hospital’s board expressed concern about the timing of the project, but decided to move forward after the county’s voters approved a bond to support the project.
"The board always has that fiduciary concern. With things are like they are now, (the concern was) how are you going to pay for it. With the county picking up a big tab, that helps. As long as the critical access cost reimbursement continues for at least a few years, we should be ok,” White said.
Funding for the construction in both Medicine Lodge and Kiowa came, in part, from a $10 million bond approved by Barber County in 2011. About $4 million was slated for Kiowa, and about $6 million for Medicine Lodge. The hospitals are each owned and operated by their respective municipalities, and the bond marks the first funding to come from the county for the hospitals, White said.
“Before that, the hospitals weren't supported by the whole county, they were just supported by their respective districts. Operationally, we still operate from tax support from our local hospital districts,” White said.
In small towns like this across Kansas, hospital administrators are paying close attention to federal deficit-reduction talks in Washington, D.C. that could lead to a 2 percent cut in Medicare spending, starting Jan. 1.
“Two percent may not sound like much,” said Vicki Hahn, who runs the Wichita County Health Center in Leoti. “But we’re a ‘critical access hospital,’ which means we’re reimbursed for 101 percent of our Medicare costs. If 2 percent gets taken away, it would put us in the red on our Medicare patients. That wouldn’t be good.”
Leoti is about 40 miles from Colorado and 110 miles from Oklahoma in a county where about 18 percent of the population is age 65 or older. Total county population is 2,276 people according to most recent U.S. Census estimates.
“We’re a frontier county,” Hahn said.
Medicare patients account for about 78 percent of the patients seen by the publicly owned hospital.
A cut in Medicare reimbursement, Hahn said, would force the hospital to ask the Wichita County Commission for help in offsetting the loss of federal support.
“That would be a big concern,” Hahn said. “If we end up losing revenue that doesn’t get replaced, we would have to come up with a much different business model than the one we have now.”
Many Medicare patients
Wichita County Health Center’s situation is not unique. Because of the disproportionate number of rural and small-town Kansans who are elderly, most of the state’s small hospitals treat a relatively high percentage of Medicare patients. Medicare is the federal health program for persons age 65 and older.
Roger Masse, chief executive officer at Ellsworth County Medical Center, said a 2 percent cut in Medicare reimbursement would result in a $200,000 loss for the public hospital he manages.
“In Ellsworth County, that’s a lot of money,” he said, noting that a three-mill property tax currently generates about $225,000 for the hospital.
“So far, operationally, we’ve been able to just about break even,” Masse said. “We haven’t had to ask the county for more than the three mills. But if we end up taking a $200,000 hit, how long can that be sustained? I don’t know.”
About 55 percent of the hospital’s patients, he said, are on Medicare.
Blaine Miller has a similar story. He runs the Republic County Hospital in Belleville. He said a 2 percent reduction in Medicare reimbursement would lower hospital revenues by about $110,000.
“That would be big for us,” Miller said. “At the same time, our charity care had gone up substantially. Last year, we had about $200,000 in charity care; this year we’re looking at about $300,000.”
Miller attributed the increase to the hospital’s non-Medicare patients either losing or not being able to afford their health insurance.
Kansas has 83 federally designated “critical access” hospitals, the most of any state in the nation.
Among other things, the designation allows the hospitals to bill Medicare for 101 percent of their outpatient, inpatient, laboratory, physical therapy, and post-acute care costs. The hospitals, in turn, agree to have no more than 25 beds, limit their inpatient stays to no more than 96 hours per patient annually, and provide 24-hour emergency room care.
The critical access program was started in 1997 with the goal of ensuring access to emergency, primary and acute care in the nation’s rural areas.
In Kansas, nine counties — Linn, Woodson, Osage, Wabaunsee, Elk, Wallace, Gray, Chase and Doniphan — do not have a hospital.
But 10 counties — Barber, Harper, McPherson, Marion, Dickinson, Washington, Pottawatomie, Nemaha, Brown, Wilson — have two hospitals with 25 beds or less.
A future with fewer hospitals?
“There is so much required of hospitals nowadays, I don’t know that all of them can survive,” said Dennis Franks, chief executive office at Neosho Memorial Regional Medical Center in Chanute. “The requirements are the same for all of us, but our resources for meeting those requirements are different.”
Many of the state’s rural communities, he said, also are having a hard time recruiting medical staff, a situation that’s likely to worsen with implementation of the Affordable Care Act on Jan. 1, 2014, which could mean thousands of additional Kansans gaining access to health insurance either through the new subsidies provided for them to purchase private coverage or perhaps through Medicaid should state policymakers choose to expand the program.
“There simply aren’t enough primary docs to go around,” Franks said.
A range of political and economic uncertainties are hindering the ability of hospital officials to plan for the future, according to a report released today by the Kansas Hospital Association.
"The 2012 election has moved the health care debate to the forefront, which is good," the association's chief executive Tom Bell wrote in an editorial accompanying the report. "However, the ongoing nature of the debate complicates hospitals’ ability to make investments."
Among the unknowns cited in the 16-page report:
• The impact of the 2012 election on Medicare reform and on implementation of the Affordable Care Act,
• The uncertain future for federal disproportionate share payments, which compensate hospitals for treating uninsured patients who do not pay, and
• Whether Kansas will expand Medicaid eligibility as provided for under the ACA.
"Cuts to entitlements, especially significant federal cuts to Medicare, could jeopardize hospitals and physicians — limiting access to care," Bell said. "The state’s pending decisions about Medicaid expansion also will have a substantial impact, at a time when hospitals have already surrendered significant Medicare revenue through the ACA with the expectation of expanded coverage."
Under the health reform law, about 130,000 additional Kansans are expected to become eligible for Medicaid in 2014. The state currently has about 350,000 people directly benefiting from Medicaid services. In anticipation that hospitals would be providing less uncompensated care to uninsured patients because of expanded Medicaid eligibility, the ACA also reduced the disproportionate share payments.
While the U.S. Supreme Court ruled much of the health reform law constitutional, its decision granted states leeway to decide if they will expand eligibility.
If Kansas opts not to expand its Medicaid coverage, Bell has said, the state’s hospitals would be put in a position of still having to care for thousands of uninsured people in their emergency rooms while losing millions of dollars in federal disproportionate share payments.
Kansas Gov. Sam Brownback has reiterated his opposition to the Affordable Care Act in statements since the ruling, but he has stopped short of saying the state won’t implement the Medicaid expansion on schedule in 2014.
"Decisions regarding the expansion of Medicaid under Obamacare will not be made until after the November elections. The Brownback administration does not speculate on hypotheticals," according to a statement issued by the Governor's Office.
Republicans are working still to repeal it, but even before the U.S. Supreme Court ruled that the Affordable Care Act was constitutional, many of its major changes were under way for Kansas hospitals, doctors and other medical providers.
In fact, some representatives of doctor and hospital groups in Kansas and nationally say that many key requirements of the law were inevitable or bound to happen with or without the law, simply because the status quo of the health care industry was unsustainable because of its costs.
In 1965, U.S. health care spending accounted for about 6 percent of the gross domestic product; by 2009, it represented about 17 percent. One culprit for the rising cost, experts say, has been payment systems that reimburse providers more for the volume of their services than for the quality or effectiveness of the care.
“I don't want to downplay the significance of the (Supreme Court) ruling,” said Tom Bell, chief executive of the Kansas Hospital Association, “but I think it’s been clear for some time that a lot of the ways that the system is changing - the movement away from fee-for-service, value-based purchasing, those sorts of things - those things were going to continue whether this law was struck down or upheld. ... So from that perspective, (the decision) was maybe not quite as momentous as we’ve been hearing on the cable news networks.”
A report on the ACA by the national Physicians Foundation published soon after the law was passed in 2010 generally was negative about the reform’s anticipated consequences, particularly for the 32 percent of the nation’s doctors working in individual, private practices of one or two physicians. For them, the authors concluded, the law almost certainly means that their forms of practice “will be largely, though not uniformly, replaced” by new arrangements that will make many of them salaried employees of hospitals or larger group practices.
Nonetheless, the report concluded, “health reform was necessary and inevitable. The impetus of informal reform would likely have spurred many of the changes (required by the ACA) independent of formal reform.”
Quietly moving forward
So as politicians continue to fight over the law, forward-looking hospitals and doctors for at least the past two years quietly have been preparing for and adopting its various provisions.
“The Supreme Court’s ruling keeps in place improved access to health care through expanded insurance coverage and important insurance reforms, which were key elements of the Affordable Care Act,” said Jeff Korsmo, chief executive of Via Christi Health, a Catholic-affiliated system that is the largest private provider of health services in Kansas. “The way we deliver health care has been changing since the Affordable Care Act took effect two years ago, and it will need to change even more dramatically in the years ahead.
“The growth in the cost of health care in the United States is simply unsustainable,” Korsmo said after the court ruling, “and it’s going to get worse because 10,000 baby boomers a day are reaching Medicare age. Those costs, combined with our federal and state governments’ fiscal challenges, all call for major change in health care.”
Three Kansas hospitals have laid off workers in the past two weeks, but that's not representative of overall industry trends in the state, according to analysts at the Kansas Department of Labor.
Labor economist Tyler Tenbrink said the state's unemployment rate for the health care industry remains very low at about 4 percent, compared to about 7 percent for all industries.
Unemployment claims in the health care and social assistance industry did jump at the onset of the recession in 2009, from about 500 to about 900 per month, he said.
"But that hasn't changed much since. Although volatile from month to month, the level has been steady," Tenbrink said. "The situation we've seen with the recent layoffs at hospitals, it's not typically an issue that the health care industry has. It's been growing quicker than other industries for a long period of time and we're projecting it to continue to grow quickly. It's not an industry that's having trouble."
This week, Hutchinson Regional Medical Center laid off 44 full-time and 11 part-time employees, about 5 percent of its staff. Last week, the hospital in Ottawa cut eight positions — about 3 percent — and McPherson Hospital cut five positions, or about 2 percent.
But Tenbrink said the statewide counts for job separations from hospitals have far outpaced unemployment claims, particularly since the recession began.
"That tells us that most of the people who leave their jobs are leaving voluntarily," he said.
Cindy Samuelson of the Kansas Hospital Association said she doesn't see a trend toward more layoffs but that hospitals everywhere were stepping up efforts to increase efficiency, sometimes by not filling empty positions.
"Efficiency in the delivery of health care is going to be essential for hospitals. Everybody is looking to make adjustments to right-size their organization — looking at staffing levels, costs, processes," she said.
Samuelson said the two main factors affecting hospitals in Kansas — and across the nation — were the ailing economy and reductions in Medicare and Medicaid payments.
"It's forcing hospitals to do due diligence, evaluating all things including staff levels," Samuelson said. "If they're going to continue to be a community hospital in today's world, they need to operate very efficient practices."
Kevin Miller, chief executive of Hutchinson Regional, said the economy and reimbursement rates had hurt his hospital's bottom line. But he said the main reason for the layoffs was to reduce a bloated staff.
"As a new CEO coming in — compared to my past experience — it was fairly evident to me that we had more staff than what we needed for our volume," said Miller, who came to Hutchinson in July after 33 years experience in health care administration in Ohio and Indiana.
→ Continue reading and see more data on health care employment trends at khi.org.