Without Medicaid Expansion, Kansas Hospitals At Risk

Several factors, including the state’s rejection of Medicaid expansion, are conspiring to put some Kansas hospitals at risk.

Two southeast Kansas hospitals — one in Independence, the other in Fort Scott — are among several that might have to close their doors.

To prevent that, both are actively negotiating potential partnerships with neighboring hospitals. Officials at Mercy Hospital Independence and the Coffeyville Regional Medical Center are talking. Similar discussions are under way between Mercy Hospital Fort Scott and Via Christi in Pittsburg.

Even if agreements are reached, Medicaid expansion will remain a crucial issue, said David Steinmann, chief executive of the Independence hospital. He’s facing cuts of nearly $570,000 in Medicare reimbursements and federal disproportionate share hospital (DSH) payments, which are designed to partially cover the costs of treating uninsured patients.

Those reductions, Steinmann said, would be more than offset if Kansas expanded its Medicaid program — known as KanCare — to cover more poor adults. He said expansion would generate an estimated $1.6 million in additional revenue for the hospital, enough to cover the anticipated reductions with about $1 million to spare.

“For hospitals like ours that are truly struggling, that could mean the difference between cash flowing or not. So, it’s really significant for us,” Steinmann said.

Unanticipated consequences

When Congress passed the Affordable Care Act, it intended reductions in Medicare and DSH payments to be offset by revenue from increasing numbers of patients with Medicaid and private coverage.

A June 2012 decision by the U.S. Supreme Court changed that. The court rejected a constitutional challenge to the health reform law but made Medicaid expansion optional for states.

The offsetting arrangement has generally worked for hospitals in the 28 states and District of Columbia that have expanded Medicaid. But hospitals in Kansas and the other 21 states that have not expanded Medicaid don’t have access to that offsetting revenue, and many are struggling as a result, particularly low-volume facilities in rural areas not classified as critical access hospitals.

The refusal of Missouri policymakers to expand Medicaid eligibility contributed to the recent closure of the Sac-Osage Hospital in Osceola. Several hospitals in southern states have suffered the same fate.

Since 2010, 48 rural hospitals have closed and more than 280 are now listed as “in trouble,” according to the National Rural Health Association.

Alan Morgan, the association’s chief executive, said rural hospitals in states that haven’t expanded Medicaid are particularly vulnerable because they can’t offset reductions in Medicare and DSH payments.

“A lot of these rural hospitals saw a double cut,” Morgan said during a recent appearance on the RFD Radio Network.

The Kansas Hospital Association estimates that rejecting expansion has cost the state about $475 million and counting.

Some lawmakers alarmed

Rep. Jim Kelly, a Republican from Independence, said he wasn’t concerned about Medicaid expansion until he found out about the financial struggles of the hospitals in his district.

“We have one very stressed hospital, and we have another that is probably not at the same level but still not good,” Kelly said at a recent legislative hearing.

Without expansion, Kelly said he feared that hospitals across the state might be forced to close their doors.

“Are my fears realistic or not?” he asked Tom Bell, chief executive of the hospital association.

Bell said several factors were conspiring to increase the financial pressure on Kansas hospitals, but he said Medicaid expansion was the most significant for many, including Mercy Hospital Independence.

“If that hospital were to decide that it couldn’t continue to operate, this issue would be at the very, very top of the list of reasons why they had to shut down,” Bell said.

Kelly is one of many moderate Republicans and Democrats who support a bill backed by the hospital association that would require Gov. Sam Brownback and his administration to craft a Medicaid expansion plan and negotiate its approval with federal officials. 

But the conservative Republicans who control the House and Senate are blocking a vote on the bill. It’s bottled up in the House Health and Human Services Committee, where, barring some procedural maneuvering by expansion supporters, it will remain.

Opponents say the federal government can’t be trusted to pay the lion’s share of expansion costs, even though that’s what the law requires. They also say expanding public coverage to poor but non-disabled adults would allow people capable of supporting themselves to “cut in line” ahead of Kansans with disabilities who receive medical care but are on waiting lists for KanCare support services.

Akash Chougule, a senior policy analyst for Americans for Prosperity, a free-market advocacy organization that wields political power nationally and in many states, said Kansas legislators who support Medicaid expansion could find themselves fighting to keep their seats.

“We certainly plan to hold accountable any legislator who supports this misguided scheme,” Chougule said in response to questions at a recent legislative hearing.

The expansion debate frustrates Steinmann, chief executive of the Independence hospital.

“We’ve got to broaden our thoughts beyond political lines,” he said. “We have an issue, and we’ve got to come together and solve this.”

Potential effect

Currently, the state’s privatized Medicaid program, KanCare, covers about 425,000 children and low-income, disabled and elderly adults. But that number includes relatively few non-disabled adults. Adults with dependent children can participate in KanCare, but only if they have annual incomes below 33 percent of the federal poverty level, about $8,000 for a family of four. Non-disabled adults without children aren’t eligible for coverage no matter how poor they are.

Expansion would make all Kansans with incomes up to 138% of poverty eligible for KanCare: $16,105 for an individual and $32,913 for a family of four.

The U.S. Census Bureau estimates that 324,000 Kansans age 19 to 64 have incomes that would qualify them for Medicaid under expansion. Of those, about 131,000 are uninsured.

The Kansas Department of Health and Environment estimates that about 151,000 Kansans who were not previously eligible would sign up for Medicaid if eligibility was expanded to the level called for in the ACA. 

The KHI News Service is an editorially independent initiative of the Kansas Health Institute.