Nov. 8, 2013 -- Obamacare and Medicaid expansion will either reap great rewards or great deficits for state hospitals, depending on who is reading a report from one of the nation’s “Big Three” credit ratings.
Fitch Ratings, little sister to the Moody’s and Standard and Poor’s credit agencies, released a report recently that could have major fiscal ramifications for hospitals in states like South Carolina, where governments have voted to not expand Medicaid programs in line with Obamacare.
Fitch found, in part, that hospitals in states like South Carolina, which have higher than national average uninsured and poverty rates, could be hurt by higher levels of uncompensated care.
Moody’s was quoted in the report, saying that hospitals in states that didn’t expand Medicaid to receive massive federal matching dollars, could take a hit to their bottom lines and perhaps see a downgrading in their credit scores and profiles.
With as much as $200 billion in federal matching dollars flowing to states that are willing to expand over the next decade, it seems that Fitch and other credit raters are taking the position that not getting as much federal matching money as other states, South Carolina’s hospitals could be relatively less attractive destinations for bonding -- and that could make it more expensive to borrow money and do business.
An intertwined stressor to the state’s hospitals involves special payments known as “disproportionate share” or “DSH funds” that they’ve received in the past to help pay for the costs of treating the uninsured. With Obamacare, those payments are being phased out and hospitals will have to make up the difference. Had Medicaid expansion been accepted here, the poor would have been able to get subsidized insurance to reimburse their treatment to the hospitals.
Cutting own throat
State Senate Democratic Caucus spokesman Phil Bailey said the report dove-tailed with what his members have been warning about: that refusing to expand federally-funded state Medicaid expansion as required by the Affordable Care Act will hurt the state in a myriad of ways.
“We are going to lose in the number of jobs that could have been created by the expansion,” said Bailey of the initial 10-to-1 buy-in the state legislature declined this year to take part in. Observers said the conservative-led General Assembly will likely come around to expansion, but only once the federal money has dwindled.
“Hospitals, if we’re not going to take the money, are going to get hurt,” said Bailey, son of a health care economist. “People will still be coming in, uninsured, to get treatment in the emergency room – the most expensive care in the hospital.”
“And guess what happens then?” said Bailey. “Hospitals will have to foot that bill and pass on the cost to the insured and we’re going to continue to see rates health care insurance rates higher than if we passed expanded Medicaid.”
Allan Stalvey, spokesman for the S.C. Hospital Association, said the Fitch report “is basically common sense,” adding that the legislature kicked a leg from beneath state hospitals when it passed on taking the federal buy-in this session.
Stalvey did praise the legislature and Gov. Nikki Haley on two key points:
- First, for setting aside tens of millions of dollars to help support struggling rural state hospitals.
- And second, for not gouging the reimbursement rates for Medicaid – keeping cuts to them much lower than in other states, which has caused access problems in other states.
Not so fast, my friend
State Health and Human Services Director Tony Keck, an Obamacare foe who oversees the state’s current Medicaid program, sees a major hole in Stalvey’s and Bailey’s argument.
Their side has a major debate point it has to overcome, according to Keck, who has been charged dually by Haley to prepare for and block implementation of Obamacare.
“For years, all the hospitals said that for every Medicaid patient that comes through their doors, they lose money,” said Keck. “And now they say they need more Medicaid patients?”
Keck said their math, like their argument, doesn’t make sense. “How is it better that if a hospital loses one dollar a patient, then it’s better if they lose one dollar on 10,000 patients? That’s $10,000.”
Keck provided a “snapshot” of the state’s expansion market:
- There are roughly 733,000 uninsured residents in the state.
- About 433,000 of those are eligible for insurance on federal health care exchanges.
- Approximately 160,000 of those eligible are already on state Medicaid rolls.
Keck said projections hold that approximately between 15 percent to 25 percent of those eligible for expansion would sign up in the first year with federal exchanges, as South Carolina has “opted out” of creating a state health care exchange. And about half that total number would sign up within three years.
That means, according to Keck, that there could be several hundred thousand additional residents with health insurance. But instead of being a boon to hospitals that desperately want them out of the ER, it could be crippling, as those signing up would tend, according to Keck, to be very sick and carrying potentially expensive pre-existing conditions.
Senate Labor, Commerce and Industry Chairman Thomas Alexander (R-Walhalla), who oversees the Medicaid expansion issue on the Finance Committee, said he sees “no reason” to change policy based on Fitch’s report.
Alexander said hospitals were getting loaned money before Obamacare on a case-by-case basis, and sees no reason why that would change, with or without more federal money.
Alexander said a more real world test needed to be applied to the report’s doom and gloom, like revisiting the issue in five years.
A spokesman for state Treasurer Curtis Loftis said this week that his office hasn’t heard anything about any of the report’s findings affecting the state’s bond rating.
Crystal ball: Observers may expect the legislature to eventually cave into expansion, but don’t expect it to be this coming year, which will be an election year. With the Tea Party continuing to flex its muscles in South Carolina, there likely won’t be much traction for a massive expansion of a state program via federal money, which will be cast as being an intrusion and coming with a variety of strings attached.