A notice from the Indiana Family and Social Services Administration (FSSA) proposing to cut Medicaid fees by 5 percent beginning July 1 is a concern for physicians, hospitals and nursing homes and may make it more difficult for Medicaid patients to find care.
Reported planned cuts in Indiana Medicaid spending next year could hold back 5 percent of payments to doctors and other providers and cut the rates paid to the lowest performing nursing homes.
If fully implemented, the changes could save Indiana about $155 million in the fiscal year that begins next July 1. Medicaid covers about one million needy and disabled Hoosiers.
The FSSA had previously extended a 1.5 percent rate increase to physicians in an effort to improve care and bring compensation to a higher level. The proposed rate reduction will result in a net decrease of 3.5 percent for Medicaid providers and will be in effect until June 30, 2010.
"Doctors understand the budgetary constraints of the FSSA because we are all facing tough financial times," said Dr. David Welsh, president of the Indiana State Medical Association and its more than 8,300 members.
"Even before the current economic situation, most private practice physicians were squeezed between declining reimbursements and skyrocketing practice costs," he explained.
"Physicians are struggling to keep the doors of their practices open and continue caring for Medicaid families. Practice costs have increased more than 20 percent in less than a decade and the gap between costs and payment continues to grow," he said.
The number of Medicaid physicians in the state is already inadequate and Indiana doctors are aging with 40 percent over the age of 50. Many are scaling back their patient loads says Welsh.
Another important community service could also be affected with a lack of physicians and fewer patients being treated--hospitals.
"Safety net hospitals like Putnam County Hospital only receive so much money. In 2008, the hospital had $2.2 million in uncollected funds from charity cases, Medicaid shortages, uninsured discounts and bad debt," said PCH Administrator Dennis Weatherford.
"In a worst case scenario, shortages in state and federal funding could force local hospitals to cut back services. Hospitals need to let legislatures know how this could affect them," he said.
"It's my understanding that this cut is a last resort," said Weatherford.
In a memo released to the press in mid-December, Roob said, "It is my hope that the state will find other ways to reduce its costs, but regrettably, the current forecast of the state's revenue has forced us into this position."
"If necessity compels us to take this draconian action, the state will reduce its cost by $100 million," he added.
More certain are the other two steps: changing the rates paid to nursing homes and changing the way prescription drugs are bought for the more than 500,000 needy children, pregnant women and very low-income adults enrolled in Hoosier Healthwise.
Those drugs are now provided to enrollees through three managed care organizations that provide Hoosier Healthwise coverage. Roob said the state can get much larger discounts from the drug companies than the MCOs, so participants will get the drugs through a separate fee-for-service program.
FSSA doesn't believe it will hurt enrollees, but it will save the agency about $40 million, he said.
These changes are also a frightening factor for nursing homes that not only rely on local physicians to attend residents but have large numbers of patients on Medicaid.
Under the nursing home rate changes, top-performing homes would receive rate increases and the worst performers would receive rate decreases, at an estimated savings of $15 million said Roob.
Current Medicaid reimbursements hamstring nursing homes in the way they can spend the money, said Steve Smith, president of the Indiana Health Care Association representing nearly 300 nursing homes.
"For example, a patient might need six hours of nursing care per day, but Medicaid may pay for only four. With more flexibility, nursing homes could spend the Medicaid funds in ways they see fit, such as hiring more nursing aides," he stated.
"All this is happening at a time when more Hoosiers are facing job loss, and the number seeking assistance from Medicaid as July approaches is likely to grow," said Dr. Welsh.
"The unfortunate impact of the cut is that some who need the care most may find it unavailable," he noted.
According to The Kaiser Commission on Medicaid and the Uninsured there were 45 million non-elderly uninsured Americans in 2007. The commission estimates that if unemployment rises from an average of 4.6 percent in 2007 to 7 percent in 2009, the number of people with employer- sponsored insurance (ESI) would decline by 5.9 million. Medicaid would increase by 2.4 million uninsured.
If unemployment hits 10 percent, ESI would fall by 13.2 million, Medicaid would increase by 5.4 million and the uninsured would increase by 5.8 million.
The conclusion reached by the commission is that increases in unemployment poses serious budget issues for states. Just as state revenues decline the ability to fund the current Medicaid program much less the increased costs associated with greater need for healthcare decline.
FSSA in 2005 and 2007 passed rules to allow similar holdbacks but didn't resort to them Roob said. A holdback in 2009 would go against rate increases such as $32 million annually that family doctors, pediatricians and other primary care physicians began receiving this year.
Roob said FSSA has enough money to cover Medicaid costs during the current fiscal year.