A lady who goes by the pseudonym “MB” sent me a note a few days ago about the inadequacy of reimbursements by all insurers, public and private.
Medicare and Medicaid, she says, “only pay about 25% of the services received” and “my Blue Cross Blue Shield only pays about the same.”
“No business can stay open when this happens day after day all day long,” she says, an apparent reference to the potential closure of Greenwood Leflore Hospital.
“So, Mr. Kalich,” her note concludes, “would you like to comment since you’re an advocate for expanding Medicaid?”
My response is that MB makes a good point, even if somewhat exaggerated. Her point, though, still doesn’t override the compelling reasons for expanding Medicaid.
First off, it’s important to distinguish between the sticker price of a medical procedure and what a hospital, or any other health-care provider, is expecting to be paid for it.
Just like no one buys a new car according to the manufacturer’s suggested retail price, no one pays for medical care at the cost that’s on the initial bill. It’s immediately knocked down to what the insurer, public or private, has agreed is reasonable for that treatment or procedure.
If it’s public insurance, such as Medicare and Medicaid, the deductions are generally steeper — so steep in fact that most health-care providers claim that what they receive does not even cover what it costs them to provide the care.
Gary Marchand, the interim CEO at Greenwood Leflore Hospital, has said that Medicare covers only about 85% of the actual treatment costs and Medicaid, 95%. I’ve heard even lower numbers on Medicaid.
The difference between a hospital that’s making money and one that’s not is whether it has enough patients on Blue Cross or other private insurance to make up for the losses on the government insurance. That’s because private insurers will pay about 30% to 40% above cost, although they, too, are constantly trying to negotiate these markups down.
The fundamental financial problem with Greenwood’s hospital is that as the population in the region has shrunk, so has its share of patients who have private insurance. With some 75% of the hospital’s patients on Medicare or Medicaid or uninsured, the remaining 25% do not bring in enough money to cover those losses.
That’s why the hospital has made the decision — as a last resort — to forget about being a comprehensive medical facility and instead scale down to something that might squeeze out a small profit. If it is successful in obtaining the designation as a “critical access hospital,” instead of getting 85% of its costs back from Medicare, the hospital will get more like 100%. That equates to an estimated $11 million to $14 million more in revenue, or just about enough to offset the million dollars or so the hospital is presently losing a month.
As to MB’s question about Medicaid expansion, I infer that she is wondering why a hospital would want more customers on whom it knows it will lose money.
My answer would be, better to get 95% of your costs than none of them.
A hospital is not like most businesses. If a hospital takes Medicare, as nearly all of them do, it has to treat everyone who shows up at its emergency room, regardless of their ability to pay. It’s been that way since the federal law was enacted in 1986. The poorer the area in which a hospital is located, the more of this uncompensated care it generally has.
Medicaid expansion — which would provided coverage mostly to the “working poor” — would help reduce the charity burden for hospitals, besides all the other economic benefits that would accrue in health-care jobs created or preserved from the infusion of new federal dollars.
The math is a no-brainer.
Consider this.
The Legislature is contemplating a one-time $80 million emergency grant program to try to keep the state’s endangered hospitals from going under. That assistance might buy a little time, but it’s not a long-term solution.
If that’s all the Legislature does, the state’s hospitals will be back next year asking for another $80 million and more.
If the Legislature, though, were to expand Medicaid, it could increase its impact roughly tenfold for the same amount of state dollars. That’s because the federal government is willing to give Mississippi $9 for every $1 the state puts up, and even cover the state’s $1 for the first couple of years.
There is no one answer to saving rural health care in Mississippi, but it can’t be done without getting more of the federal government’s money in the form of higher reimbursements and less uncompensated care.
Medicaid expansion should have been the easiest part to pull off. Instead, the politics in this state has made it the hardest.
- Contact Tim Kalich at 662-581-7243 or tkalich@gwcommonwealth.com.
