Gov. Dannel P. Malloy’s administration used additional federal funding that will make its way to the state in 2014 under the Patient and Affordable Care Act as the main reason for proposing deep cuts to the state’s hospitals and Medicaid program.
More than $513 million will be added to the state’s coffers as a result of the federal legislation. But it won’t arrive fast enough to spare Connecticut’s hospitals from deep cuts.
Malloy’s budget proposes annualizing the $103 million in cuts to hospital funding that went into effect in December. In the second year of the budget, hospitals would face another cut of $146 million and reimbursement for the uninsured population is completely eliminated.
Office of Policy and Management Secretary Ben Barnes said the amount of uncompensated care to hospitals will dramatically shrink as the state’s uninsured population drops from 11 percent to 2 percent.
“Are we doing it sooner than they will receive additional revenue from the private insurance market? Yes,” Barnes said. “We’re doing that because we need to reduce spending in the budget and live within our means.”
Jennifer Jackson, president and CEO of the Connecticut Hospital Association, said her members are “profoundly disappointed.”
“It is unacceptable for the state to balance its budget — yet again — on the backs of hospitals and the patients they serve,” Jackson said. “The administration has acknowledged that these cuts will hurt hospitals, but that is an understatement. Quite simply, it will devastate them.”
Barnes acknowledged that the cut in funding won’t be painless, but he said the hospitals have been treated well over the years and will be able to adapt.
In 2004, the state capped and reduced by half the Medicaid rate it had been paying hospitals for the State Administered General Assistance (SAGA) population. The cut came at a time when that population was growing.
Then, in 2010 under former Gov. M. Jodi Rell, the state decided to transition the solely state-funded SAGA program into the Low Income Adult program in order to take advantage of federal matching funds under the Affordable Care Act.
That means in 2010 the state was paying about 35 percent of the costs for the Medicaid patients, and today it’s paying 70 percent of the costs. However, since then the program has grown significantly from around 45,000 patients to an estimated 86,000.
“We might be receiving more money, but there are more people coming through the door,” Stephen Frayne, senior vice president of the Connecticut Hospital Association, has said. “It’s an aggregate loss.”
The hospitals aren’t the only ones to be hit with increased costs.
Parents on HUSKY will be asked to purchase their insurance through the exchange starting in 2014.
The poorest of parents would remain on the HUSKY program, but those who earn between 133 percent and 185 percent of the federal poverty level will be kicked off under Malloy’s budget proposal. Pregnant women and children are exempted and allowed to stay in the program even if their income falls within that range.
Barnes argues that those families will be able to get insurance through the exchange and receive a subsidy from the federal government to help pay for their monthly premiums. The change will save the state $5.9 million this year and $59.5 million in the second year of the biennium.
Rep. Toni Walker, D-New Haven, said moving HUSKY parents over to the exchange is something the legislature will look at to make sure it doesn’t end up doing more harm than good.
“Making sure though that what we’re doing is not going to cost other citizens in other areas. We cannot rob Peter to pay Paul,” Walker said. “We need to make sure all of the things that we lay out are going to be leading toward the direction of saving money, but also making sure that we sustain the services we have for the people who need it most in the state of Connecticut. We cannot walk away from them.”
However, advocates believe that’s exactly what the state is doing.
“Few of these parents will, as a practical matter, be able to afford the premiums and other cost-sharing required to buy insurance on the exchange, even with the federal subsidies,” Sheldon Toubman, an attorney with New Haven Legal Assistance, said.
Toubman, who has filed a class action lawsuit against the state for failing to process Medicaid applications in a timely manner, said these low-income families will not be able to afford the monthly premiums and other out-of-pocket costs associated with exchange plans.
The federal government has yet to rule on Connecticut’s request to impose an asset test on Medicaid clients, a move that could kick as many as 13,000 individuals off the program. Toubman and advocates have opposed implementation of the asset test.