Cuts to Not-for-Profit Medicaid Plans Harm Everyone

by Georganne Chapin
April-May 2011

Everyone Georganne Chapinin the health care field will feel the pinch of Medicaid cuts under the recently passed New York State budget, but some sectors will bear the brunt of the spending reductions. One such sector will be community-based not-for-profit managed care organizations such as my organization, Hudson Health Plan. This cut, in turn, threatens the level of care and cost of service that all consumers will face – Medicaid patients directly, and everyone else as well.

It’s a little known fact that not-for-profit, managed-care plans finance the health care for two-thirds of New York’s Medicaid population. In other words, we make it possible for two out of three non-elderly Medicaid beneficiaries to receive health care. The dust hasn’t settled yet on exactly how much of our funding will be cut, but for organizations like ours that reported little if any surplus revenue in 2010, even a funding cut of a couple of percentage points translates into a question of survival. Not only are our own patients and employees vulnerable; doctors and hospitals rely on organizations like Hudson Health Plan for revenue to maintain their practices – so cuts to our budget hurt their operations and affect all their patients.

What’s more, the bleeding surely will continue. Without a miraculous economic recovery – a highly unlikely event – more people will need our services, and health care costs will keep rising. Even though this year Governor Cuomo convened what he called a Medicaid “Redesign” Team to earmark Medicaid budget cuts, the team did nothing to address the long-term problems with the system.

Meanwhile, another cloud is gathering on the horizon, from Washington, DC. House Republicans, led by the Budget Committee Chairman Paul Ryan, have proposed that states receive a fixed, lump-sum “block grant.” So as more working poor struggle to make ends meet, or lose jobs in this recession and watch their unemployment benefits run out, New York State won’t receive enough federal money to adequately fund their Medicaid benefits. This would drastically impact the State’s entire health care infrastructure, exactly at the moment when demand for services is on the rise.

In addition, not-for-profit Medicaid health plans are facing increased pressure to sharply increase the rates we pay hospitals and specialists. Unfortunately, we do not have much negotiating power. As a Medicaid plan, we are obligated to contract with a hospital in each county we serve. In counties with insufficient competition among hospitals, the existing ones can insist we pay them 10 or 15% (or more) above the Medicaid rate. This is taxpayers’ money! Where was the Medicaid Redesign Team on this?

Together, higher costs and reduced funding create a dismal forecast for not-for-profit Medicaid plans and the people who rely on them for health care. Over the last several years, Hudson Health Plan achieved the highest quality incentive scores of any Medicaid plan in New York State and the highest ratings in overall satisfaction among Medicaid Managed Care members in the Hudson Valley.

We’ve been racing to the top in terms of quality of care and customer satisfaction, but the proposed cutbacks could reduce us to the point where our only focus will be on survival.

Furthermore, short-term savings through budget cuts will result in long-term problems. Reduced funding could halt the tremendous progress Medicaid managed care has achieved over the past 20 years.

For more than two decades, Hudson has lived up to the high expectations of its mission, “to promote and provide access to excellent health services for all people.” More light must be shed on the threats we face, and the public must say “no” to further budget reductions.

Georganne Chapin is president and CEO of Hudson Health Plan, a community-based, not-for-profit health care organization serving the Hudson Valley.

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