While waiting for reform, job growth, hospitals must look to control costs
The only way out is for the economy to create jobs— with health insurance
Two years ago, on the eve of the federal government’s massive bailout of the financial services industry, I wrote in these pages that hospitals were under siege from “relentless Medicare and Medicaid funding cuts, soaring medical malpractice costs, unsustainable pension fund contributions and the swelling ranks of the uninsured.” My concern at the time, against the backdrop of an imminent recession, was that capital-starved hospitals would lose access to funding mechanisms that would ensure they have the resources to care for their patients and serve their communities.
A few months later, the American Recovery and Reinvestment Act of 2009 included an increase in federal Medicaid matching rates —hardly a cure for hospitals’ access-to-capital problems, but still an immensely important reprieve from what would have otherwise been devastating Medicaid cuts for dozens of states.
Two long years later, we remain mired in a recession that many economists have declared the longest in American history. The national unemployment rate hovers near 10%—a sobering number that may well be the “new norm”—and gaping state budget deficits have become numbingly routine. California continues to teeter on the precipice of bankruptcy, and Texas, with its $25 billion deficit, has actually floated the idea of dropping out of the Medicaid program. Here in New York, a looming $9 billion deficit poses an ominous threat to a struggling Medicaid program whose funding already has been slashed a staggering nine times since 2007.
Hospitals have hardly been immune to this economic malaise. In all 50 states, institutions large and small are struggling with razor-thin or negative bottom lines, and over the past two years, many hospitals—including 160-year-old St. Vincent’s Hospital in Manhattan, a community anchor if ever there was one—have closed their doors for good.
Indeed, New York magazine’s Oct. 25 cover warned that “Something is Killing Our Hospitals … St. Vincent’s was just the beginning,” and the accompanying story observed that “the financial health of New York City’s hospitals has been deteriorating for years and appears to be nearing a critical juncture.”
While New York’s hospital woes may be particularly acute, there’s no question the outlook is bleak all over. And while the national economy may yet avoid the much-predicted double dip recession—a recession followed by a short-lived recovery followed by another decline—I’m deeply concerned that America’s hospitals won’t be as lucky.
For starters, those vital enhanced Federal Medical Assistance Percentages funds dry up in June 2011, and there are no signs that Congress has an appetite for another extension. So, even though the demand for Medicaid services will continue to surge in many states due largely to enrollment growth, an invaluable funding stream for the program will go dry. And the impact will ripple beyond Medicaid. According to the Congressional Budget Office, the enhanced FMAP assistance has been an effective measure in creating jobs and increasing demand in the economy.
The loss of enhanced FMAP funding would be less troublesome if state budgets were showing signs of recovery from their greatest fiscal crisis since the Great Depression, but that’s simply not the case. A report this year from the Center on Budget and Policy Priorities found that 46 states face budget shortfalls totaling $112 billion for the fiscal year ending next June.
In the very recent past, many states would have responded to such extreme fiscal pres- sures by raising taxes, but that was before the rise of the Tea Party. While its overall influence on the recent 2010 elections has been a topic of considerable debate, few would argue that the Tea Party’s aggressive “Taxed Enough Already” platform has had a chilling effect on even the suggestion of raising taxes. When New York’s governor-elect flat-out dismisses raising taxes despite inheriting a $9 billion deficit in the bluest of blue states, there’s no question the country has turned hard against tax increases as a means to close budget gaps.
To be sure, hospitals (and their bottom lines) eagerly await the chief benefit of federal health reform—a huge increase in the number of Americans with health insurance—especially when, according to the Centers for Disease Control and Prevention, one in four adults under 65 reported being without health coverage at some point in the past year. But that expansion doesn’t begin in earnest until 2014, and for hospitals struggling just to break even right now, 2014 may as well be a century away.
In the meantime, Medicaid and other statesponsored insurance programs from Maine to California and Minnesota to Texas will continue to operate under severe financial pressures, and will doubtless be prime targets for the budget scalpel in 2011. So where does that leave us? As I see it, the only way out is for the American economy to generate jobs, jobs and more jobs. And they must be jobs that carry health insurance so we can begin to transition millions of Americans off the Medicaid rolls (before health reform puts millions of others on them). It’s all about jobs. Because no matter what any egghead economist says, there is no such thing as a jobless recovery.
And until those jobs materialize, America’s hospitals—the essential backbone of our nation’s healthcare system—will simply have to wring out every last efficiency and do more with less.
Kenneth Raske is president of the Greater New York Hospital Association.