Maine hospitals are poised to lose hundreds of millions of dollars and thousands of jobs as the result of looming federal cuts, according to the hospitals’ lobbying group.
The Maine Hospital Association said Wednesday that Medicare cuts called for under the federal deficit reduction plan will cost Maine $21 million and nearly 3,000 jobs in 2013. The cuts are scheduled to begin next year and continue until 2021.
The jobs estimate came from a new report prepared by Pittsburgh consulting firm Tripp Umbach for the American Hospital Association, the American Medical Association and the American Nurses Association. The report measured direct job losses in health care and predicted ripple effects such as reduced spending by hospitals and their laid-off workers in other areas of the economy.
Congress approved the Medicare cuts, which total $10.6 billion next year nationally, as part of a hastily reached budget deal that followed a standoff between the Republican-controlled U.S. House and Democratic President Barack Obama over raising the federal debt ceiling.
The plan directed a “supercommittee” of lawmakers to find more than a trillion dollars to reduce the deficit. The committee failed, and unless Congress finds the savings over the next few months, deep spending cuts will be triggered automatically in January 2013 in a process known as sequestration.
Medicare, the government health insurance program for the elderly, will be cut up to 2 percent from 2013 to 2021, costing Maine hospitals $230 million over that period, according to the Maine Hospital Association.
The debt ceiling will need to be raised again next year, because the last fight over the country’s debt obligations raised the ceiling only enough to pay the federal government’s bills through the end of this year. Maine hospitals are worried that impending fight could lead to even more rollbacks.
“Cuts of this magnitude will negatively affect access, quality and the local economy,” Steven Michaud, president of the MHA, said in a press release. “We urge policymakers to craft more sensible solutions to our nation’s budget challenges.”
At least seven hospitals have announced layoffs of more than 125 employees this year, according to the association. The weak economy and rising numbers of people who can’t afford their medical bills also are some of the pressures facing Maine hospitals.
“This is the reality of the cuts-only approach to deficit reduction,” said Garrett Martin, executive director of the Maine Center for Economic Policy. “Without a balanced solution that includes revenue increases as well as spending cuts, we will never be able to sustain popular and important programs like Medicare and Medicaid.”
Also on the horizon are steep cuts to reimbursements to hospitals for patients on Medicare under the federal health reform law. From 2011 to 2019, that is expected to cost hospitals in Maine $879 million, according to the MHA.
The federal health reform law also brings financial rewards for states that lower costs through better management and coordination of health care.
Tax credits that help small businesses to insure their employees and the law’s mandate that larger companies provide health insurance or pay a fine will benefit health care providers, Jeff Austin, vice president of government affairs and communications for MHA, said Wednesday.
“To the extent more coverage is provided, hospitals are better off,” he said.
Joel Allumbaugh, a health policy expert at the Maine Heritage Policy Center, said government-managed health care, such as the Medicare and Medicaid programs, controls costs by cutting reimbursements rather than solving underlying problems.
“Our current hospital system in Maine sustaining status quo is not a win,” he said. “This speaks to the need to both reduce government’s role in health care and realign our delivery system. Payment reform that rewards value and true transparency to inform patients are foundational to our success. The current cost structure is an emergency; I think it is critical that be balanced with any discussion about hospitals seeing reduced funding.”
Another perceived threat to hospitals’ bottom lines is a big pay cut in store for doctors who treat Medicare patients. The pay cut has little support in Washington but forces a scramble for money each year — the formula used to fund Medicare hasn’t appropriated enough money to cover the program’s costs for about a decade. So Congress repeatedly steps in to delay, avert or shrink the pay cut in an annual ritual known as the “doc fix.”
Maine hospitals, which employ about half of all doctors in the state, say the cut would total $100 million. While Congress is unlikely to allow the pay cut to happen, finding the money to restore doctors’ pay could lead to other hospital cuts, the association said.
At the state level, tighter eligibility requirements for MaineCare, the state’s Medicaid program, will stress hospitals, the association said. Hospitals will have to foot the bill when patients who lose MaineCare coverage show up for treatment.
The state also owes hospitals about $450 million, debt that has accumulated since 2009 as hospitals continue to serve Medicaid patients without being fully reimbursed by the state.
“We’re continuing to hope for a plan to pay the debt,” Austin said.