How will Florida compensate for lost federal hospital funds?

FORT LAUDERDALE, Fla. (AP) – Florida health officials and lawmakers are facing a quandary over how to replace the likely annual loss of $1.3 billion in federal funds which compensate hospitals and providers that care for large numbers of uninsured and Medicaid patients.

The state has known for some time that the so-called low-income pool funding will likely end in June. It’s still unclear what the bottom line impact will be on the state budget, but the seemingly inevitable loss in hospital funding could be just the ammunition that Medicaid expansion proponents have been looking for.

The federal government asked Florida to study alternate ways to help hospitals pay for treating uninsured and Medicaid patients. A report released late Thursday offers three possibilities, including expanding Medicaid to roughly 1 million more low-income Floridians, which Republican lawmakers have vehemently opposed. But they may warm to the idea when faced with the possibility of having to dip into general revenue funds. The Legislature, which convenes in March, would have to approve any expansion.

Federal health officials have given Florida’s low income pool more than $1 billion a year since 2005, but are likely stopping the funds this summer because the Affordable Care Act assumed that states would expand Medicaid and that hospitals wouldn’t need those funds because more patients would have insurance. But when Florida lawmakers rejected Medicaid expansion in 2013, hospitals have lobbied aggressively about the negative impacts of losing those critical funds.

The report laid out two other possible ways to replace the federal funds, including switching to a broad-based funding source, which could include a health care related tax and an increase in how much patients and insurance companies pay for services. Another possibility is to create an incentive program that pays hospitals for quality health outcomes such as low infection and re-admission rates. But hospitals generally do not like that approach because they aren’t guaranteed payments as they are now and would only get the funds if they meet certain objectives.

The report warns “no single option or combination thereof is void of drawbacks.”

The reports points out that Medicaid expansion would significantly reduce the amount of uninsured, but warns the state might not want to pick up the tab. The federal government has agreed to pay 100 percent of the bill for the first three years and 90 percent after that. But one of the main reasons state Republicans rejected expansion in 2013 is because they worried the feds won’t make good on their 90 percent commitment, leaving Florida on the hook for billions of dollars.

Florida hospital groups are pushing for Medicaid expansion and a replacement funding source, saying both are essential.

“Florida has over 3 million people without health care coverage. Most work in low wage jobs that do not offer health benefits. They often lack access to primary care and wait until serious illness arises before seeking treatment. The uncompensated care that results is something Florida’s businesses and patients have come to understand through higher health insurance premiums and out-of-pocket costs,” Florida Hospital Association President Bruce Rueben said, noting the challenges in the current Medicaid program highlighted in the report.

The state transitioned its Medicaid program to a managed care model last year, paying private insurance companies a set amount of money to care for patients. The loss of federal hospital dollars could also impact those insurers. That’s because some hospitals like Miami’s Jackson Health System are able to get local government funding to offset their costs for caring for so many uninsured patients. When the federal hospital funding dipped during the recession, some hospitals gave their local funds to the state so the state could draw more federal dollars and essentially buy back their rate cuts.

“If insurance companies have to increase how much they pay hospitals to make up for this loss, then it could impact the state budget because the state might have to pay insurers more money to manage Medicaid populations,” Florida’s Medicaid director Justin Senior told a Senate committee last week.

When asked how much it could impact the state budget, Senior said it’s difficult to predict.

“There are $800 million in local tax dollars that go to support hospital rates,” and he said it’s possible that all, none or some of it would have to come from state’s general revenue.