Last week after the administration of Gov. Dan Malloy made emergency cuts of $103 million to the current state budget, one thing became abundantly clear: the governor doesn’t care much for hospitals.
That Malloy needed to make cuts during the fiscal year shouldn’t come as a surprise. For one thing, it has happened before. But moreover, budget estimates for fiscal 2016 were based on the absurd assumption from OPM that revenues would increase by 7.1 percent over the previous year.
Hospitals have been taking it on the chin since early in Malloy’s first term, when they agreed to a new tax as a means of bringing more federal money into the state. The hospitals, the state promised, would be “held harmless.” But that turned out to be an empty promise, as the state returned less to the hospitals each year, while federal matching funds shrunk.
Hospitals should pay their fair share, to be sure, but it really looks like they’re being singled out. While increasing taxes on the state’s 28 hospitals, five of which reported deficits in 2014, the state also has reduced the amount it gives them to treat the uninsured. And the Connecticut Health I-Team has reported that operating profits fell at the state’s acute-care hospitals by 35 percent in fiscal 2013. And unlike many other organizations, hospitals have to use lots of their profits to invest in outrageously expensive technology or risk losing patients to other facilities.
For Office of Policy and Management chief Ben Barnes to rationalize these hospital aid cuts, which will amount to $190 million, by saying “Obviously their profits have been growing,” is misleading, especially at a time when other sources of hospital revenue, such as income from investments, are shrinking just as the state’s are. Indeed, the poor performance of the equities market is one reason Malloy has given for this latest round of cuts and the early deficit that precipitated them.
UConn economist Fred Carstensen’s Connecticut Center for Economic Analysis came out with a study earlier this year that called the hospital tax “self-destructive” and “a three-time loser.” Carstensen’s analysis says the increased hospital taxes and cuts “cascade through the economy, costing Connecticut 4,000 jobs, cutting household income by a quarter billion dollars, and diminishing tax revenue, worsening the budget deficit.” And of course there are the additional human costs of reduced access to healthcare and outcomes that will inevitably be worse.
Eager to overcome irrelevance and seize the political advantage, Republican leaders have formed an alliance with hospital executives in calling for a special session of the General Assembly to address not only the hospital cuts, but systemic problems in the budget process. And they have a point. For the fiscal year 2017-18, projections call for a deficit approaching $1 billion.
Seems like we go through this ugly process with frightening regularity. A two-year budget is passed in the middle of the night, using a combination of gimmicks, tricks, and whopping-big tax increases to keep it balanced. Then down the road there is a mid-year revenue shortfall. Officials scratch their heads and scramble to fix it. Shockingly, this year’s problems have cropped up only three months into the new budget. And now the hospitals must pay for it. This is no way to run a railroad.
So far the Malloy administration is defending the new hospital cuts by pointing to the relatively high salaries of hospital CEOs, such Yale-New Haven’s ($2.5 million) and St. Francis’ ($2.8 million).
“The hospital industry made hundreds of millions of dollars in profit last year, with executive teams making money hand over fist,” said Malloy spokesman Devon Puglia.
So by that logic, the state should look in the mirror. UConn men’s basketball Coach Kevin Ollie made $3 million last season, while women’s Coach Geno Auriemma, who has won exactly nine more championships than Ollie, is making a paltry $2 million. Several doctors and deans at UConn Hospital are making in the neighborhood of a million.
UConn President Susan Herbst receives a salary of well over $600,000 (not including generous incentives) and the use of two beautiful state-owned homes. Despite scant experience in higher education, Mark Ojakian, Malloy’s former chief of staff, was just appointed interim president of the Board of Regents at an estimated $335,000 a year, which is actually down from the $380,000 paid to his embattled predecessor, Gregory Gray.
What is the justification from UConn officials and those in the governor’s office when confronted with those numbers? They typically shrug and say, “We have to pay good money to get the best and the brightest.” Evidently that logic does not extend to healthcare.
It may be that a special session isn’t the best way to deal with our chronic budget problems, but the current system is clearly unsustainable — and nerve-wracking. One thing appears certain: Barnes’ statement last year about Connecticut being in a “permanent state of fiscal crisis” was right on the money.
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