More than 200 hospitals in Illinois are engaged in a touchy political battle centered on a problem that is a large reason why 60 percent of them lose money: Medicaid. In the effort to attract more federal money to Illinois for the health-care program, which serves poor and disabled individuals, wealthier hospitals are now pitted against poorer hospitals. The poorer hospitals are generally those that serve a higher share of Medicaid patients and children.
What’s at stake is whether poor and disabled patients will receive the care they need and whether hospitals serving large numbers of them will be forced to cut services or even shut down. This issue will grow more critical in the years ahead, given the intent of Congress to cut the growth of Medicaid spending by $10 billion over the next five years.
The hospital battle in Illinois will begin playing out next week during state Medicaid budget hearings.
The tussle comes amid one of the worst financial shortfalls in the federal-state Medicaid program’s history. The Illinois Department of Public Aid pays hospitals, at best, 80 percent of what it costs them to care for poor patients. Adding to the state’s Medicaid woes is a system of federal money distribution that shortchanges Illinois. The state cares for 4.5 percent of the nation’s Medicaid patients but receives only 3.6 percent of the Medicaid pie.
How much the feds reimburse states is complicated and dates to Lyndon Johnson’s Great Society era. The federal government picks up half of Illinois’ Medicaid tab. But the federal share for Iowa is 63 percent, for Michigan it’s 64 percent, and for Wisconsin it’s 57 percent.
Those factors conspire to keep hospitals in Illinois that care for large numbers of Medicaid patients on the brink of closure.
Illinois is one of 17 states that has resorted in recent years to a fix allowed by the federal government. The state has taxed hospitals, used that money to leverage matching funds from the federal government, then handed the money back to hospitals. The hospitals don’t necessarily get back what they put in. More money is supposed to be distributed to hospitals that handle more children, Medicaid and uninsured patients.
Last year, though, some hospitals that serve few Medicaid patients reaped a windfall. Money also went to nursing homes and places that care for the developmentally disabled, even though those facilities didn’t have to pay the tax.
The state wants to do another hospital tax plan this year, as it should. But federal authorities have signaled that Illinois will have to change its distribution formula so more of the wealthier hospitals pay in more than they get back. The point, after all, is to target the money to the greatest need.
Any plan must be approved by the legislature and then submitted to the federal Centers for Medicare & Medicaid Services for consideration.
Last year, only eight hospitals received less than they put in. The federal government is looking for more net losers this time around.
The Illinois Hospital Association is attempting to work out a new plan with state Medicaid officials. The IHA still wants to limit the number of hospitals that have to contribute more than they receive. In other words, the IHA still wants every hospital, or almost every hospital, to come out a winner.
The state’s emphasis, however, should be to secure a plan that will pass federal muster and give a greater take of the funds to the hospitals that handle the greatest Medicaid load. Yes, that means more of the financially secure hospitals will wind up as net losers this time.
But for hospitals like Mt. Sinai, located in the heart of Chicago’s impoverished West Side, money from the assessment tax is a lifeline. At Mt. Sinai, more than 60 percent of the patients are on Medicaid and another 12 percent are uninsured. The hospital has survived only by scrimping on investments in its facilities. This year, with $4 million from the hospital levy, Mt. Sinai expects to break even for the first time in years.
Everyone pays a price when a hospital caring for the poor has to close its doors. Better to pay the price–through a fair hospital assessment tax–to keep them open.
