Healthcare is a significant part of the economy in Northern Arizona and one of the few areas with continued growth during the recent recession. But continuing uncertainties about Medicaid cuts are a big headache for local hospitals and health centers across the region. “None of the proposals look good,” said Bill Bradel, president and CEO of Flagstaff Medical Center (FMC), where 30 percent of patients are currently on Medicaid.
Partly due to large numbers of small employers who don’t provide employee medical coverage, as well as proximity to the reservation, reliance on Arizona’s Health Care Cost Containment System (AHCCCS) in the Flagstaff area is high. Bradel estimates the proposed cuts will reduce annual income by $12 million – an amount by which expenses will have to be reduced. And since around 70 percent of healthcare costs are for staff, that may mean job losses.
Last month, Arizona’s Hospital and Healthcare Association (AzHHA) presented Governor Brewer with a plan for the state’s hospitals to funnel a good proportion of their federal Medicaid reimbursement to the state, avoiding cuts in Medicaid eligibility. AzHHA is a statewide trade association representing more than 100 hospitals, healthcare systems, affiliated health organizations, and the patients and communities they serve. AzHHA is worried that the cuts will not only harm low-income Arizonans but also damage the state’s economy. AHCCCS is a shared matching program between the state and federal government – for every $1 the state puts in, the federal government matches it with $2. With $510 million in cuts to AHCCS, the state will forfeit more than $1billion in federal mataching funds, which could mean the loss of 14,000 healthcare jobs. AzHHA predicts commercial health plan premiums will rise because of hospitals passing on increased uncompensated care costs from treating the uninsured.
But, with Arizona facing a fourth straight year of budget deficits and Medicaid costs rising by 65 percent over that time, most senior hospital managers feel the governor wants to avoid the hospitals imposing their own tax, in order to maintain federal matching dollars, by taxing them directly.
On March 31, Brewer sent her planned reforms to U.S. Health Secretary Kathleen Sebelius, in an attempt to close a gap estimated at $763 million for this year and $1.15 billion in 2012. Her move will slash the state’s “Cadillac” coverage – the Medicaid plan in Prop 204 approved by voters a decade ago that made Arizona one of six most generous states in the country – a state where employer-provided benefits are well below the national average. To make up the shortfall from the state’s general fund, cuts have already eliminated treatments such as transplants, dental care, podiatry and frozen the KidsCare health insurance program, while provider (e.g. hospitals and physicians) Medicaid reimbursement has been cut by five percent. Now Brewer is asking for a new five-year federal waiver to allow changes that will save the state $500 million – at the top of the list is freezing eligibility for a group quaintly termed “childless adults.” Brewer’s initial proposal to cut 280,000 from AHCCCS has been revised and the latest plans will see 140,000 people being dropped, with new enrollment frozen. The plan also increases AHCCCS co-payments, charges “no-show” fees for missed appointments and eliminates state reimbursement for emergency care of non-qualified aliens. The federal government has to approve the final proposals in advance of Sept. 30, when the state’s current AHCCCS agreement expires.
While FMC hopes to stave off job losses, a hiring freeze has already been implemented for all but the most urgent positions. With annual revenues of around $350 million and profits typically around three to four percent of that figure, FMC has some funding reserves to help weather the economic storm – for a while, predicts Bradel. Unlike some other health care professionals, he does not expect a big rise in emergency room visits. “Such visits have been down at FMC over the last 18 months – when people don’t have insurance, they simply don’t use the system as much,” he explained. Bradel sees the biggest challenge for the future “is to focus much more on wellness, to keep people out of hospital.” FMC has been starting demonstration pilot projects to set up educational resources and clinics for patients with conditions such as diabetes and congestive heart failure, to help them keep up with their daily wellness routine and avoid their conditions turning critical. “We’d like to show that such approaches can work,” Bradel said.
Over at North Country Health Care, the largest federally qualified health center in Northern Arizona, it’s a different story. Chief Medical Officer Dr. Eric Henley explains that 10-15 percent of their funding comes from a federal grant mandating treatment of the uninsured. Hence, around 40 percent of North Country’s patients are currently on AHCCCS, with 15 percent on Medicare, 25 percent with commercial insurance and the remaining 15-20 percent uninsured. If the governor’s proposal to cut 20 percent of the current Medicaid population goes ahead, Henley estimates a reduction of around 10,000 patient visits annually. Some patients may still be able to pay on the sliding scale, whereas others might stop getting care completely. Henley thinks they’re looking at a loss of around $1.5 million to their total annual operating budget of $30 million budget – a sizeable five percent reduction, which could threaten up to 30 equivalent positions at North Country statewide. North Country has 14 clinics across the state, including three in White Mountains, one at Grand Canyon South Rim and a number along I-40. Of their current total of 350 employees, around 200-250 are based in Flagstaff/Coconino County. There may have to be a reduction in opening hours too.
Henley also worries about human costs. With health care charges the leading cause of bankruptcy across the country as a whole, the stress can take a toll. Governor Brewer wants individuals to “increase responsibility” for their wellness. The best hope for the newly uninsured and financially incapable is that they will be eligible to receive subsidized coverage in 2014 when the national health care law takes effect – and that they stay healthy in the meantime. FBN