Medicaid Programs Threatened by Potential Loss of Uncompensated Care Pool Funding

The announcement that Florida Gov. Rick Scott had filed a lawsuit against the Centers for Medicare & Medicaid Services over the federal funding of its uncompensated care pool underscores the seriousness of the situation for the four non-Medicaid expansion states that operate those pools.

The outlook for the matter being resolved without creating at least some financial havoc for hospitals in those states appears dim at this point. And there is the potential for serious permanent disruption.

CMS is in the process of, or getting ready to, review the Medicaid waivers that created these pools, which were designed to cover care at safety net hospitals offering uncompensated care to vulnerable residents.

CMS officials outlined its reasoning for giving Florida's pool, called a Low Income Pool, a close review in a letter to the state's Medicaid agency that predated the legislature's ending its current session without changing its course on Medicaid expansion. CMS' letter argues that Medicaid would be the preferred avenue for funding the type of coverage for which LIP funds are used, and suggests Medicaid expansion would be the way to go.

The implication is that the LIP waiver will not be renewed when it expires on June 30. That would result in a loss of $1.9 billion in health care revenue, according to the Center on Budget and Policy Priorities.

Florida's governor, a former hospital executive, argues in the suit that the CMS decision amounts to coercion to expand Medicaid, which was explicitly not allowed by the U.S. Supreme Court in 2012.  

The four states with pools that did not expand Medicaid are: Florida, Kansas, Tennessee and Texas. Medicaid expansion states with pools are: Arizona, California, Hawaii, Massachusetts and New Mexico.

Officials for the Florida Hospital Association couldn't be reached for comment, but representatives for hospitals in two of the other states that didn't expand Medicaid expressed concerns about the field's ability to maintain care for patients without insurance absent both the uncompensated care pool funding and an ACA-backed Medicaid expansion by their respective states.

"It's pretty dramatic as to what it would do," said Craig Becker, president of the Tennessee Hospital Association. "The big thing is that we hope CMS treads lightly on this because it really could have far-reaching effects on our hospitals' ability to provide the level of care that CMS comes to expect and certainly the state of Tennessee has come to expect."

The loss of the roughly $500 million would result in the state's putting limits on care and affect graduate medical education. Becker says the association expects their pool to be maintained to at least the date of its waiver expiration June 30, 2016.

The result in Texas also would be far-reaching.

"Basically, I don't think we'd be able to maintain our Medicaid program if we didn't figure out a way to renew this in some fashion," said John Hawkins, senior vice president for government relations for the Texas Hospital Association.

The waiver that created Texas' more than $3 billion pool expires Sept. 30, 2016. Texas' situation is exacerbated by its limited window for a possible Medicaid expansion, because the Texas state legislature only meets every other year, this year ending June 1. Once it adjourns, it won't be back until January 2017, Hawkins notes.

In both Texas and Tennessee, the hope is that the pools will gain an extension after they are reviewed by CMS.

Texas' Hawkins says its waiver operates in a different fashion than that of Florida, and has 85 percent of plans using managed care. "We do think Texas is different from a lot of these other states," Hawkins said.

Similarly, Tennessee's Becker says, "I'm walking a fine line, I'm not panicking, because I think they're just trying to make sure our payments are valid. I can't argue with that."