Missouri’s children’s hospitals could see $140 million cut in Medicaid funding
As they lose millions each month from the COVID-19 pandemic, Missouri’s children’s hospitals may have to brace for cuts to Medicaid reimbursements totaling as much as $140 million.
The issue involves payments to hospitals for patients from out-of-state. Missouri is the only state that supplements the reimbursements to narrow the difference between the patient’s home state Medicaid rate and Missouri’s.
During the legislative session that ended last week, lawmakers proposed cutting the add-on payments. The measure would disproportionately impact children’s hospitals because their specialized pediatric care draws families from neighboring states. Children’s Mercy in Kansas City and two St. Louis-area institutions, SSM Health’s Cardinal Glennon and BJC’s St. Louis Children’s Hospital, would be hit hard.
While lawmakers backed off during the session truncated by the pandemic, they vowed to return to the issue within the year.
That could be through an administrative rule imposed by the state’s Medicaid program, MOHealthNet, the state budget or by another bill in the next legislative session.
Or the question could return if Gov. Mike Parson calls a special session of the legislature within the next few weeks, according to House Budget Chair Cody Smith.
“I think there could be an opportunity to talk about all things health and health-care related in the time of a pandemic,” Smith, R-Carthage, said. “This certainly is in line with that because dealing with Medicaid is our largest program in the state that provides health care to Missourians.”
The proposal to cut the payments was tucked into a larger resolution proposed by Smith and state Sen. Tony Luetkemeyer, a St. Joseph Republican. It challenged any expansion of Medicaid in Missouri and established work requirements for recipients.
On Friday, the Secretary of State certified an initiative petition by expansion proponents who hope to see the question on the November ballot.
A unique Medicaid system
Scrutiny of the payments follows a renewed effort by the Trump administration to “clamp down on impermissible financing arrangements” that increase states’ share of federal dollars.
“We have seen a proliferation of payment arrangements that mask or circumvent the rules where shady recycling schemes drive up taxpayer costs and pervert the system,” said Seema Verma, Centers for Medicare and Medicaid Services (CMS) administrator, who proposed a rule last November to tighten federal oversight of the supplemental payments.
Both Republican and Democratic governors have warned that CMS’s proposed rule could lead to reduced federal dollars and inadequately funded Medicaid systems across the country.
MOHealthNet Director Todd Richardson has told lawmakers that Missouri’s supplemental payment system has drawn CMS’ attention. (A request for an interview was declined by Richardson through the Department of Social Services spokesperson.)
In Missouri, the supplements are funded through a tax hospitals pay. The provider tax, devised in the 1990s by then-Gov. John Ashcroft, allowed the state to leverage a greater share of federal funds.
Facing a cash-strapped budget in 2002, the hospitals agreed to raise the provider tax assessment to a higher rate, at the request of lawmakers and with the approval of CMS.
The change meant an even higher portion of the state’s match for federal Medicaid funding was supplied by the hospitals. Today, the provider tax funds about 80 percent of the state’s match.
But with the agreement to pay a rate much higher than surrounding states, Missouri agreed to provide supplemental payments for out-of-state patients.
If the proposed rule is approved, states and CMS would be required to review and reauthorize the add-on reimbursement systems within two to three years of the rule’s effective date.
“We should take the opportunity to fix this before CMS fixes it for us,” Smith said.
The payments were also noted in a study of the state’s Medicaid system that proposed ways to create a $1 billion in savings. It reported that Missouri paid $177 million in the year studied to providers for out-of-state patients.
Since the hospital tax revenue is earmarked for Medicaid provider reimbursements, cutting the payments would not free up money for other state-funded programs like schools.
The reductions would total approximately $140 million annually to the state’s three children’s hospitals. One estimate provided to legislators put the cost to Children’s Mercy in Kansas City at $70 million.
That would be on top of the estimated $1 million a day Children’s Mercy has lost due to COVID-19, according to hospital spokesperson Lisa Augustine. lt has had to furlough 600 workers this year because of decreased surgeries, outpatient visits, emergency room traffic and admissions during the pandemic.
“Eliminating these payments, especially during the COVID-19 pandemic, would severely limit the ability of these pediatric hospitals to treat poor and sick children,” Augustine said in a emailed statement. “And, because the payments are not funded by Missouri taxpayers, the elimination of these payments would not save taxpayers or the State of Missouri a single cent -- only sick children and their families would pay the cost of such a catastrophic cut.”
BJC Healthcare would have seen $70 million in cuts annually, $40 million of which would have been to their St. Louis Children’s Hospital.
“St. Louis Children’s Hospital is grateful to the legislature for recognizing that a cut of this magnitude during financially unstable time for both pediatric hospitals and our patients would be detrimental,” Kendra Whittle, the hospital’s spokesperson, said in statement Friday.
SSM Health’s Cardinal Glennon, which would have faced a $30 million cut, declined a request for comment.
Bipartisan heartburn
The prospect of putting children’s hospitals in jeopardy drew bipartisan criticism during a May 11 public hearing for the legislation. One Democratic lawmaker suggested that the proposed cuts were tied up in the politics of Medicaid expansion.
“I can’t help but feel like the only point of this to punish you all for supporting Medicaid expansion by taking a $180 million out of your budget at a time you need most,” state Rep. Peter Merideth, a St. Louis Democrat, said to a hospital lobbyist during the hearing. “I find that offensive.”
Eliminating payments that benefit those who don’t live in the state looks good “on the surface,” state Rep. Brenda Shields, a St. Joseph Republican, said. Digging deeper exposed a different picture, she added.
Children’s hospitals are regional because they need specialized equipment and are expensive to operate, she noted.
“I know we need hospitals for children, we care about children and we can’t harm children,” Shields said.
The out-of-state families provide an economic benefit, as well. In 2017, they added $2.7 billion to the state’s economy, according to the Missouri Hospital Association.
But state Sen. Bill Eigel, a St. Charles Republican who supports the cuts, said the issue remains one of “fairness.” Missouri shouldn’t have to offset the other state’s Medicaid systems, he said.
It also goes to the larger issue of how the state funds public health, according to Eigel.
“I don’t know how you could be against my amendment but also be against Medicaid expansion,” Eigel said. “Because the result is the same, which is more federal dollars going into a broken system.”
By the end of session, Smith said he dropped the issue because of time limitations.
“The elimination of the out-of-state payment would cause severe budget concerns for a lot of children’s hospitals, specifically, so we need to take our time and transition through this very thoughtfully,” Smith said.
Moreover, lawmakers didn’t have time to answer the biggest question: what would provider reimbursements look like once the payments to out-of-state patients were cut and how they would be reallocated?
“The ultimate end goal is that we redirect those resources allocated to the out-of-state payment back to hospitals in a little bit of a fair and balanced way, but we don’t know what that looks like right now,” Smith said.
The Associated Press contributed to this story.
This story was originally published May 25, 2020 at 5:00 AM.