Two Funding Challenges to Denying Medicaid Expansion in Alaska

As Alaska’s health care community continues to anxiously await a decision on Medicaid expansion by the Parnell administration, awareness is increasing about a world under the ACA that does not include an expansion of Medicaid.We wrote about the Medicaid coverage gap in July – perhaps the most important consequence to coverage in a post-ACA world without expanded Medicaid.

However, the consequences to Medicaid providers is also significant – perhaps life-threatening.  Here are two important examples.

1.  Hospitals would lose at least $20m from federal Medicaid DSH payments with nothing to make up the lost revenue.  Disproportionate Share Hospitals (DSH) , those that see a high number of uninsured, rely on that federal funding to stay open.  The idea was that those uninsured would be covered through Medicaid expansion, or via subsidies on the Exchange.  As a result, the loss of the DSH payments would not have meant a loss of hospitals.  Without expansion of Medicaid, with the loss of DSH payments, there can only be two reasonable outcomes:  the closing of hospitals that can’t handle the uninsured, or a massive increase to commercial rate payers to cover both the uninsured and the loss of federal support.

2.  Community health clinics (CHCs), which receive funding to cover the uninsured, have been put on notice that such funding will go away, because “the ACA doesn’t operate in a world where there are uninsured, so the payments won’t be available,” according to a CMS official.  One CHC executive understands that those payments will be changed to “payments that offer incentives for quality outcomes, rather than covering the uninsured.”  What those payments look like, however, is an open guess.

An interesting thing to note in all of this is how unprepared folks are – across the country – for a post-ACA world where Medicaid expansion has not been implemented.  Because this matter is purely the creation of the Supreme Court decision, rather than an outcome of the legislative process, industry folks have not yet had even two months to think through the world of possibilities.  This is a new wrinkle, and one that some health care leaders are having a hard time getting their hands around.