February 24, 2007
 

At a time when states are striving to expand healthcare coverage, the Bush administration is pressing ahead with plans to cut nearly $4 billion in aid for public hospitals and other providers of last resort for the uninsured.

The cuts would affect hospital funding provided by Washington as part of Medicaid, the federal-state program known in California as Medi-Cal. It serves more than 55 million low-income people, including the working poor, elderly nursing home residents with few financial resources, and many children of low-income parents. In addition, it has provided funds for hospitals and other healthcare institutions that serve large numbers of uninsured patients.

Public hospital officials said California institutions could lose $500 million a year under the reductions, with the Los Angeles County public health system taking an estimated annual cut of $200 million.

"It's equivalent to shutting down all the outpatient clinics we own and operate, as well as those we contract with in the community," said county health chief Dr. Bruce Chernof.

The cuts are prompting sharp protests from governors and dozens of lawmakers, partly because they represent an end run around congressional defenders of the aid program. After failing to get Congress to approve the reductions last year, the administration is now trying to impose them through a regulation that does not require action on Capitol Hill.

"The administration is moving forward with these proposed changes without any input from Congress or governors," the National Governors Assn. complained Friday in a letter to congressional leaders. In an unusually direct challenge to the administration, the governors asked Congress to pass legislation that would block the rule from going into effect.

Separately, some independent experts have questioned whether the administration has the legal authority to make unilateral cuts. The confrontation recalls other recent cases in which the administration has tried to impress its will on Congress. For example: White House "signing statements" attached to anti-terrorism laws that assert the president's right to carry out the legislation according to his judgment.

Defending their actions, administration officials said the new rule was aimed at preventing some states from gaming the system. States have sometimes used the hospital funding for the uninsured to leverage more federal funding, officials said. The rule would limit the kinds of institutions eligible for such funding, as well as the rates the federal government would pay.

The goal is straightforward, said one federal official. "It's a simple concept: You can't get paid more under Medicaid than it costs to serve patients who are eligible for Medicaid," said the official, who asked not to be identified because of the politically sensitive nature of the issue.

Hospitals use the federal funding to offset the cost of caring for the uninsured, who are often members of working families that make too much to qualify for Medicaid and too little to afford their own coverage. Trauma centers, neonatal intensive care units, emergency departments and burn units could be among those jeopardized by the cuts, hospital officials said.

Other proposed healthcare cuts are included in the regulation, bringing the total nationwide to about $5 billion.

Officials in Sacramento said that Gov. Arnold Schwarzenegger had expressed concerns to Washington about the cuts, but that the state had been assured that California would be exempt. The issue remains unresolved, and Schwarzenegger intends to pursue it when he visits Washington this weekend, said Michael Bowman, a spokesman for the state Department of Health Services.

Medicaid funding is governed by complex agreements between the states and the federal government, and federal officials say a deal negotiated by California last year already complies with the proposed regulation.

"We do not believe this rule would adversely affect" California's arrangement, said Mary Kahn, a spokeswoman for the federal Centers for Medicare and Medicaid Services. "It is in compliance with the rule."

But California hospital officials say the language of the regulation says nothing about an exemption for the state. They say their own lawyers analyzed the new rules and have concluded the state would be affected.

"We don't understand how the [federal government's] statements square with the actual language of the proposed rule," said Melissa Stafford Jones, president and chief executive of the California Assn. of Public Hospitals and Health Systems. "If [Washington] had stated in the rule itself that the proposed provisions would not apply to California, then perhaps we would come to a different conclusion."

Regardless of how California's case is resolved, opposition to the cuts is unlikely to melt away. The federal regulation — published last month with little fanfare — would become final this summer and take effect Sept. 1. President Bush's budget assumes the cuts will go through. But the timing doesn't leave much opportunity for states to come up with funding alternatives.

"The proposed rule [is] a significant cost shift to states that governors strongly oppose," said the governors association letter.

Ultimately, the controversy could wind up in federal court. Some independent experts said the administration's own actions suggested a recognition that it might be on shaky legal ground.

"Why did they think they needed legislation last year, and this year they can do it by regulation?" asked Diane Rowland, executive vice president of the Kaiser Family Foundation and an expert on the healthcare safety net.

"Usually, an administration tries to use its regulatory authority first before going to Congress, so this is an interesting flip."

In Congress, lawmakers of both parties say they will try to pass legislation that would block the cuts from going into effect. Forty-three senators and 226 House members have signed letters indicating their opposition.