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Blame the state for cuts in care for poor

Last modified: 10/28/2011 12:00:00 AM
The Lakes Region General Hospital network is only one of the first dominoes to fall in what is a slow-motion collapse of health care services.

LRGHealthcare announced this week that it had closed most of its physician practices to new Medicaid patients and will stop providing non-emergency room care to 3,500 current Medicaid recipients next month. Its action follow decisions by Frisbie Memorial Hospital in Rochester and Wentworth-Douglass Hospital in Dover, which made less drastic cuts in Medicaid services.

LRGHealthcare's president and board of trustees are being castigated by Gov. John Lynch and called irresponsible, but it is Lynch and the Legislature who are at fault. New Hampshire reimburses hospitals less to care for the poor than any other state. That was true before lawmakers decided to help balance the state budget by saddling hospitals with what is in effect a $250 million Medicaid tax over the biennium.

For decades, in a scheme known as Mediscam, the state taxed hospitals to inflate the cost of providing Medicaid services, received a payment equal to the tax from the federal Medicaid program, and then returned the tax, minus the federal match, to hospitals. This year, instead of raising revenue in a responsible way, lawmakers opted to keep the tax money and the match. For LRGHealthcare, that meant a loss of $9 million in revenue and a $4 million tax.

The state's decision has, so far, led to the loss of more than 1,000 health care jobs, including 100 in the Lakes Region system. Most were well-paying jobs. Hospitals will soon have to pay the state millions more in taxes, so more job losses may be in the offing.

In June, nine hospitals sued the state over the cuts, which they said would make it impossible for them comply with federal law requiring them to provide adequate care to Medicaid recipients. Lynch claims since the state didn't cut the Medicaid reimbursement rate paid to physicians, the decision to stop caring for the poor was made for political reasons. Politics may be in play, but the reality is that doctors and other providers cared for Medicaid recipients at a loss because hospitals used surplus revenue to subsidize that care. Wipe out the surplus by imposing a tax, and the subsidy is no longer affordable.

New Hampshire hospitals are paid, on average, between 50 and 60 cents on the dollar to care for Medicaid recipients, although the rate can be as low as 30 cents on the dollar for some institutions. Traditionally, hospitals offset those losses by raising rates for those with insurance, but insurers have begun saying no. So have the employers who purchase coverage from them. The state's rock-bottom Medicaid reimbursement rate is one reason New Hampshire has one of the highest private insurance rates in the nation.

More hospitals are considering cuts in the level of Medicaid services, including plans to close the door on new Medicaid patients. A decision in the hospital lawsuit case could change the picture. So could a decision by the congressional "supercommittee" charged with finding $1.5 trillion in budget cuts by Thanksgiving. It could end the Medicaid disproportionate share program that's allowed states like New Hampshire to milk the system for more than $2 billion.

What the governor is defending is a system that helps fund government by taxing hospitals, which struggle to shift the tax to insurers, whose customers can escape the tax by going without coverage. The result: more poor without care, more employers who can't afford to cover their workers, and more uninsured. Some tax system that is.


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