State budget's Medicaid cuts worry Centra president

RICHMOND — Virginia’s proposed budget cuts to Medicaid funding would cost Lynchburg-based Centra Health $8 million in the next two years, and the hospital company’s president says much of that cost would be passed on to people covered by private health insurance.

“It’s a hidden tax” on the insurance plans purchased by employers and their workers, says George W. Dawson, Centra president and CEO.

But even though cuts are proposed, Medicaid expenses are the chief driver in a $1.4 billion increase over the next two years in Virginia’s health care costs, according to data given to Virginia’s legislators last week as they began to wrestle with a state budget constrained by falling revenues.

That increase in total expenses looms because of a jump in the number of Virginians who qualify for Medicaid’s assistance to low-income people, particularly children, pregnant women and the disabled.

Dawson, other hospital executives and doctors are lobbying the General Assembly to keep Medicaid reimbursements to hospitals at its current level, which covers only 72 percent of the cost of treating low-income patients. That repayment would fall to 64 percent under the proposed cuts.

No leaders in Richmond have stepped forward with a plan that would pay for the no-cut funding the health care industry is asking legislators to provide. Dawson himself doesn’t have any thoughts about where they could find the money, he said.

With state revenues expected to be roughly 10 percent less than this year’s tax take, legislators are just beginning to grapple with a 2010-12 budget drafted by former Gov. Timothy M. Kaine.

Newly inaugurated Gov. Bob McDonnell is expected to propose amendments to Kaine’s spending plan this week, and McDonnell already has indicated that he’s hoping to squeeze more efficiency out of the state’s Medicaid program.

By some measures, Virginia’s program already is leaner than many others. The state’s total spending on Medicaid ranks 20th in the nation according to Kaiser Family Foundation data, while its median household income ranks ninth, says the U.S. Census Bureau.

The concept of a tax on insurance premiums that Dawson was describing may sound like part of the national health care reform package that’s being negotiated in Washington, but it’s in effect now in Virginia and most other states, he said.

The price that insured people pay to cover Medicaid care for low-income and uninsured people isn’t actually called a tax. It’s really a “cost shift,” as doctors and others in the health care field put it.

It means the 28 percent of a Medicare patient’s treatment that isn’t covered by the state’s reimbursement to the hospital gets shifted to patients who pay for their own care, usually through employer-sponsored health insurance, Dawson said.

That shift results in higher costs and less coverage for those private plans.

About 12 percent of Centra’s patients qualify for Medicaid, Dawson said, including those in its nursing homes and the ones it treats as outpatients.

Of the babies delivered at Centra’s Virginia Baptist Hospital, 42 percent are Medicaid cases, hospital officials said.

Dawson said Centra wins awards for its efficiency and, “We’re doing everything we can to reduce operating costs.”

“We’ve got a complete review of our operations under way right now, but at some point the Medicaid cuts are just shifted to privately insured patients and employers, so that cost shift, in effect, is another tax,” Dawson said.