A Tight Budget Year Could Mean Health Care Spending Cuts
The havoc of the COVID-19 pandemic, which has strained health-care providers across the state, might not be enough to spare hospitals and nursing homes from Medicaid spending cuts in the coming year.
Top Republican leaders in the Florida House and Senate acknowledged Thursday a chance that lawmakers could make health-care cuts as they struggle to craft a balanced budget amid the economic wreckage caused by the coronavirus.
“So, I would say that everything is on the table,” Senate President Wilton Simpson (R-Trilby) said when asked about reducing Medicaid payment rates for hospitals and nursing homes.
Simpson said the Senate is considering ways the state could take advantage of additional federal health-care funding arrangements to help offset potential cuts to hospitals.
“They are being vetted through our committee process,” Simpson said, “and once we know what all the opportunities are, we will be better able to assemble those pieces, to see if any cuts will be necessary.”
Legislators are confronting a budget shortfall of at least $2 billion because of a drop in tax revenues during the pandemic and issues such as a surge in Medicaid costs. The budget woes have prompted lawmakers to rethink past spending decisions, while looking at how to collect sales taxes owed on online purchases. GOP leaders have repeatedly warned that cuts are likely inevitable.
While Simpson did not provide details about options to spare hospitals from cuts, he might have been referring to what are known as state-directed provider payments, which would have to be approved by the federal Centers for Medicare & Medicaid Services. The state could draw down additional or supplemental federal Medicaid dollars and include those funds in payments made to Medicaid managed-care plans. The state would then direct the Medicaid managed-care plans to make payments to providers based on certain quality incentives.
In a $96.6 billion budget proposal released last month, Gov. Ron DeSantis authorized the creation of a state-directed provider payment program. But DeSantis’ proposal didn’t specify when during the upcoming 2021-2022 fiscal year the program could begin operating and did not specify how much additional money the state could receive.
Also, the governor’s proposal did not include any of the required state funding to draw down the additional federal dollars. Instead, the required state matching funds would come from local governments.
Justin Senior, CEO of the Safety Net Hospital Alliance of Florida, said the creation of the additional financing program could generate new funds but said it wouldn’t be available for all hospitals. Meanwhile, reducing Medicaid payment rates would affect all hospitals.
“It would be a statewide cut, but they are not replacing it with a statewide program,” Senior told The News Service of Florida.
Jointly funded by the state and federal governments, Medicaid provides health care to poor, elderly and disabled Floridians. Medicaid is a counter-cyclical program: In good economic times, enrollment is low, but during economic downturns --- when states are struggling with tax collections --- enrollment spikes.
Since the pandemic began, Florida has seen a 20 percent spike in enrollment, with more than 4.26 million people enrolled. To help offset the costs associated with the enrollment spike, the federal government increased by 6.2 percentage points its share of Medicaid costs.
Senior, who in the past was state Medicaid director and secretary of the Agency for Health Care Administration, said that with the size of the Medicaid program, he understands why it is targeted for reductions.
But Senior said state money for Medicaid can come from sources other than general revenue. When the state cuts general revenue, it also reduces the amount of federal matching funds for the program. Senior said that can make it “bizarre and frustrating” to reduce the program in an effort to save state general revenue.
“To save $400 million in general revenue you have to cut $1.5 billion out of the Medicaid line (because of the lost federal matching dollars),” Senior said. “It’s an attractive target, but it’s actually difficult to squeeze money out of the program without having a major negative impact.”
The annual legislative session will start March 2, and crafting a budget for the 2021-2022 fiscal year will take center stage.
When asked about cutting Medicaid payment rates Thursday, House Speaker Chris Sprowls, R-Palm Harbor, said the issue is “part of a bigger budget conversation.”
But Sprowls said increases in federal matching funds for Medicaid give the state an opportunity to see if lawmakers can direct state dollars that were once needed to fund the Medicaid program to other budget areas.
Kristen Knapp, a spokeswoman for the Florida Health Care Association, said a top priority for her nursing-home industry group is protecting a $105 million increase in Medicaid funding for nursing homes included in the current year’s budget.
“This funding is critical, not only to facilities' ongoing response to COVID, but also to ensure measurable advances in quality care can continue,” Knapp said in a statement. “With the state's increasingly growing aging population, our nursing centers need resources to invest in people, technologies and training, as well as infection prevention supplies, to ensure the health, safety and well-being of the residents entrusted to their care.”
Simpson also said the Senate was taking into consideration the amount of federal CARES Act funding Florida hospitals and nursing homes have received in a pandemic aid package that Congress passed last spring.