There's something happening here

Now that the Supreme Court has affirmed the law and the people have spoken through the recent election, the US health reform plan (Obamacare) will proceed apace.  Attention may turn back to Massachusetts, whose implementation of similar policies is several years in advance of the rest of the country.  There is much good to report in the Bay State in terms of near-universal health care insurance coverage for the population.  But there is also something quietly happening that is greatly concerning.

Read this recent summary from the Massachusetts Hospital Association:

On Tuesday, Governor Deval Patrick announced 9C budget cuts as part of a plan to help close a $540 million FY2013 budget gap caused by slower-than-expected tax collections.  [Note: 9C cuts are those made by the Governor without requiring legislative approval.]

As opposed to an across-the-board budget cut, the governor's 9C budget reductions to the MassHealth program will have a direct $26 million effect on specific hospitals, namely, freestanding pediatric acute care hospitals and qualified pediatric specialty units; three critical access hospitals; plus those hospitals that will apply for MassHealth infrastructure and capacity building grants. Another $26 million was cut from Medicaid managed care plans. In total, the governor's actions shaved more than $128 million from three MassHealth line items

Of equally great concern to hospitals is the expected release of the 2013 RFA – which is the main contract between the MassHealth program and hospitals. The RFA has been delayed for four months and is expected to be released soon. The 9C cuts that the governor announced will be incorporated into the RFA in addition to the other planned reductions affecting all hospitals statewide, and will further exacerbate the Medicaid underpayment gap.

In simplest terms, we have now made it possible for more people (300,000 since 2006) to be covered by Medicaid, a good thing.  But providing insurance coverage means that people are more likely to use it.  If, at the same time, you impair the ability of hospitals to cover the costs of carrying for those people, you have simply pushed the problem upstream.

In prior times, the shortfalls in Medicaid would have been made up by private insurers, but those days are over.  Also, you could count on Medicare to be fully compensatory, but those days are over.

So, in total, the Massachusetts reimbursement system is systematically being pared back to a level that will not permit many hospitals to cover their costs.  The ones that will be most vulnerable will be the hospitals serving the most vulnerable, the safety net hospitals, who derive a large percentage of their income from Medicaid.  But other hospitals will be hurt as well (except for the lucky system whose market power provided above-market private insurance payment rates.)

Here's the big picture prediction for Massachusetts and other states watching the Massachusetts experience:  Continued concentration of the hospital industry to create a larger referral base and to gain market power over the insurers.  But the safety net hospitals will be left out of those deals, for fear they will be a drag on earnings since such a large portion of their revenues is subject to state appropriations.  The ironic end result: A growing disparity in the level and quality of hospital care offered to the poor, precisely at the the time the poor are given greater access to health care services.

Maybe it's time for a new movement.  For inspiration from another era, watch this video.