Say "ow": Next round of Medicaid budget cuts to hit providers

According to an e-mail that went out late last Friday afternoon from Nico Gomez, the Deputy CEO for External Relations and Communications of the Oklahoma Health Care Authority (OHCA), the agency will recommend to its Board this week that it make up for shortfalls in its FY ’10 budget by adopting a cut of 2.5 to 3 percent in the rates it pays all its providers.

Back in December, OHCA’s Board approved an initial series of cuts to bring its FY ’10 budget into balance based on anticipated monthly cuts of 5 percent to its appropriations from the General Revenue Fund.  Because of the loss of federal matching funds, OHCA implemented some $69 million in cuts to make up for projected shortfalls in state funding of $16.9 million. The agency opted to eliminate or cap certain covered services and make changes to payment methods rather than cut reimbursement rates.  It did warn at the time that deeper cuts would leave no option but to cut provider reimbursement. (As a condition of accepting enhanced federal matching dollars as part of the stimulus package, the state is strictly precluded from restricting Medicaid eligibility, as we discussed here).

Now with appropriations cuts doubling to 10 percent for December and January, OHCA is facing a further shortfall of $4.8 million, which will mean the additional loss of about $14 million in federal matching funds. Last week’s e-mail stated:

We have staved off provider cuts as long as the budget would allow; however, we can no longer avoid it. Therefore, we wanted to advise you that at the board’s next meeting on Jan. 14, OHCA will recommend an action to reduce total expenditures by review and revision of provider rates to be effective April 1, 2010.

The April 1 effective date, while driven by the need to go through the Medicaid rate review and approval process, also allows the Legislature time to step in and avert or minimize the cut through a supplemental appropriation from the Rainy Day Fund or by allocation of additional stimulus funds.

OHCA’s reluctance to cut provider rates is understandable – it had spent many years working to raise rates from historically low standards in response to pressure from provider groups and from those who argued that decent rates are critical for ensuring access to care for Medicaid recipients (Full disclosure: I was involved in a lawsuit brought by my then-employer Community Action Project of Tulsa County along with pediatricians against OHCA for low reimbursement rates).  And for some health care providers, these rate cuts may prove genuinely difficult to absorb.

Yet as one who follows the state budget crisis shortfall closely and worries deeply about the impact that cuts are having on essential public services, it’s hard not to wonder if this isn’t partly a positive development. It’s one thing for budget cuts to hit children with mental health issues, abused women,  low-income seniors and at-risk youth. These are populations that have few resources and often can’t or don’t vote or know how to make their voices effectively heard in the political process.  But according to its most recent annual report, OHCA has contracts with some 850 hospitals, 320 nursing homes and 15,000 physicians, among other providers. That’s a lot of people and businesses who make campaign contributions and hire lobbyists and know just how to express their displeasure. Perhaps the cries from those constituents will have a better chance of being heard and convincing policymakers and the public that the pain this budget crisis is inflicting is real and must be addressed.