“It’s a little too early still for the loss of this funding to trickle down to hospitals, but it will happen soon,” says Allan Baumgarten, a Minneapolis-based consultant on healthcare policy, finance and local market strategies. With several sources of federal funding giving out at the same time, the effect on hospitals and other providers could be substantial, he says.
Loss of federal subsidies started on June 1
Federal subsidies of COBRA insurance for the newly unemployed, which covered 65 percent of the COBRA premium, expired on June 1. And on Friday, unemployment benefits will run out for 1.2 million people nationwide because the U.S. Senate has not extended the filing deadline.
The generous subsides of COBRA insurance, first enacted in Feb. 2009, have blunted the effects of the recession for hospitals. The Obama administration estimates about half a million workers who had been losing their jobs each month were eligible for COBRA and up to one-third took advantage of it. But with the expiration of the federal subsidy, combined with the loss of unemployment benefits, the unemployed would be hard pressed to keep health insurance coverage, Mr. Baumgarten says.
More unemployed coupled with loss of Medicaid funds
While the recession may be receding, the number of unemployed swelled to 14.5 million in May, compared with 8.5 million the year before, according to the Employment Situation. The ranks of the uninsured, which grew by 3 million, to 46.3 million, in 2008, the last measured year, are now thought to be well over 50 million.
Add to this Congress’ unwillingness to extend enhanced federal Medicaid funding for states beyond the end of the year. Without an expected $25 billion in extra Medicaid funding to cover the first six months of 2011, states will have to cut back Medicaid services. Already, according to the National Conference of State Legislatures, 38 states and Puerto Rico were predicting a combined budget gap of $89 billion for FY 2011.
Relief won’t come for another 3½ years
“Each of these losses of funds, taken separately, would be a big blow for hospitals, but taken together, they present a major problem,” Mr. Baumgarten says. “This is a triple-whammy.” The healthcare reform law will provide coverage to 32 million more people in 2014, but that is three and half years from now. Until then, he says, “hospitals are going to have a dry spell.”
Mr. Baumgarten predicts a spate of layoffs and mergers. He expects more acquisitions such as Vanguard’s $417 million takeover of Detroit Medical Center. He says for-profits like Vanguard will drive the takeovers because they have better access to capital.
What hospitals can do
Hugh Collins, managing partner of Hospital Turnaround Specialists in Wilson, N.C., says
hospitals whose EDs are deluged with non-paying patients have several options. For example, they can refer patients to less expensive urgent care centers for treatment. They can also set up free clinics and advertise them.
Above all, “hospitals have to watch their costs very closely,” he says. “They have to be a lean provider. They have to manage their costs.”
Contact Mr. Baumgarten at baumg010@tc.umn.edu.
Contact Mr. Collins at collinshh@earthlink.net.
