As states anticipate Medicaid shortfalls, hospitals urge Congress to bolster commercial plan enrollment

• Hospital advocates say Congress should prioritize support of commercial health insurance.
• Many states say they expect Medicaid budget shortfalls.
• Congress is wrestling over what — if any — coverage supports to include in its next major coronavirus bill.

Hospitals are emphasizing the need for Congress to take steps to bolster enrollment in commercial health plans over expanded Medicaid eligibility. The lobbying push comes as states say they expect budget shortfalls in their Medicaid programs.

Hospital advocates are urging Congress to undertake a series of steps that allow the newly unemployed to retain commercial health coverage. As unemployment claims surpassed 40 million this week, an American Hospital Association (AHA) letter urged a key congressional committee to:

• Provide employers with temporary subsidies to preserve healthcare benefits
• Cover individuals’ costs of COBRA benefits
• Open a special enrollment period for health insurance marketplaces
• Increase eligibility for federal subsidies for marketplace plans

The AHA letter asked the committee to strengthen Medicaid but to “prioritize maintaining private health benefits for individuals and families and to increase coverage options for those who are already uninsured.”

A letter from the Federation of American Hospitals (FAH) sought the same steps to bolster commercial health coverage.

The only Medicaid-related request was to block the Medicaid Fiscal Accountability Regulation (MFAR) proposed rule, which a Manatt and AHA analysis estimated would cost hospitals between $23 billion and $31 billion in reduced Medicaid payments.

The only Medicaid request to Senate leaders in a May 21 letter from the Catholic Health of the United States, which represents 2,200 hospitals and other provider organizations, was to add more funding to the $175 billion previously appropriated for provider grants and then target that new funding to Medicaid providers.

Vulnerabilities in the Medicaid program

Hospitals’  lack of emphasis on Medicaid in favor of commercial health insurance likely reflects the much lower hospital payment rates of the former. A large shift of patients from employer-sponsored coverage to Medicaid coverage would raise serious financial problems for hospitals, industry analysts say.

“Job losses will weaken payer mix as individuals shift from commercial insurance to Medicaid or simply lose insurance altogether, though temporary furloughs and the ability to retain insurance under COBRA or purchase on the exchanges will partly mitigate this impact,” Moody’s Investors Service stated in a May 13 report.

The financial challenge of a shift in payer mix to Medicaid coverage soon could become steeper. Of 19 states with available projections, 17 say a budget shortfall is “almost certain” or “likely” for FY21, according to a recent Kaiser Family Foundation (KFF) survey.

If newly unemployed Americans surge into Medicaid programs, that could “cause a crisis in every state to start dealing with tens of thousands to hundreds of thousands of new Medicaid applications and Medicaid claims,” said Dan Schulte, senior vice president for healthcare operations with HGS Healthcare.

Medicaid payments to hospitals already were $19.7 billion below costs in 2018, the most recent year studied by AHA. Hospitals were paid only 89 cents for every dollar spent to care for Medicaid patients that year.

“Providers will have to deal with declining reimbursement from urgent care and emergent care that are now Medicaid claims, instead of the expected reimbursement from employee health plan coverage,” Schulte said.

Next steps for Congress

The push-and-pull over Medicaid and commercial health plan support mechanisms is playing out in Congress as the Senate negotiates with the House on another expected coronavirus relief package.

The opening bid in that negotiation was the House-passed HEROES Act, in which relevant provisions include:

• Increasing by 14 percentage points Federal Medical Assistance Percentage payments to state Medicaid programs
• Delaying implementation of the MFAR rule until the end of the public health emergency
• Creating a special enrollment period for Affordable Care Act marketplaces and a new special enrollment period for Medicare
• Paying COBRA coverage premiums through January 2021 for laid-off or furloughed workers

Lobbyists and attorneys said they expect Congress to finalize a package by July.