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Hospitals Must Adjust To Health Care Reform

By BEN BARNES

March 29, 2013

Connecticut hospitals are under a great deal of scrutiny. This is partly because Gov. Dannel P. Malloy proposed a significant restructuring of funding to hospitals to halt unsustainable growth in that portion of the state's Medicaid program. Additionally, recent news reports raise troubling questions about how hospitals charge for services. Many proponents of health care reform believe that to improve outcomes and lower costs, we must deal with hospitals first.

Some hospitals are pushing back against the governor's budget because of what they perceive as cuts to their bottom line. The reality is more complex. Hospitals have benefited from extraordinary increases in state funding over the last decade, especially in the few years since Connecticut embarked on Medicaid expansion.

The state funding to hospitals increased significantly from $712 million in the fiscal year ending in June 2003 to $1.75 billion this fiscal year — an increase of 245 percent. Since 2010, the increase averaged a whopping 24 percent annually, rising from about $1 billion to $1.75 billion.

The governor's proposal would hold hospitals at just about that amount through 2015. It may not be as much as hospitals want, but it's a whole lot more than they used to get.

The bigger picture of health care reform rests on two critical goals.

First is access — getting adequate, affordable health coverage for everyone, including the 10 percent of Connecticut residents who are uninsured as well as the thousands who have inadequate insurance, too high out-of-pocket costs, coverage restrictions or other serious defects.

Second is controlling all health care costs. These goals are related. If we cover everyone, more people will receive cost-effective preventive care and providers will spread the costs of their facilities, equipment and staff over more patients. At the same time, the better we control costs, the easier it will be for everyone to afford health care.

Connecticut needs to pursue both these goals aggressively. We are doing this through Access Health CT, our health insurance exchange that will offer convenient access to affordable, high-quality health plans, including significant federal subsidies for those who need it. Enrollment starts later this year. We are also doing it through our Medicaid program, which serves our poorest residents with a comprehensive health benefit.

Within a year, one-fourth of all Connecticut residents will receive health coverage through one of these avenues, giving us an opportunity to demand the most cost-effective care from providers and insurers.

The federal Affordable Care Act requires that we seize this opportunity with respect to hospitals. Previously, state and federal funds went to hospitals for uncompensated care — the costs of caring for people without insurance. As the federal government invests hundreds of millions to get these people covered, it is logical that we would stop making uncompensated care grants. Otherwise, we will drive up the overall costs of health care delivery.

Connecticut is one of the most aggressive states in implementing federal health care reform. We began the Medicaid expansion in 2010 with the Low-Income Adults program, which now costs us about $750 million. Other states will cover these individuals starting in 2014. We are one of a few states that is meeting our deadlines to have a well-functioning exchange this fall. Because we are implementing these reforms expeditiously, we can — and should — reduce uncompensated care grants more quickly than the federal government requires, which is what the governor proposed.

Most important, funding under the proposed budget is ample to ensure that hospitals thrive. The financial status of Connecticut's hospitals, as reported by the Office of Health Care Access, demonstrates that the majority of hospitals have surpluses most years. In addition, a recent report in Time Magazine documents hospitals — including several from Connecticut — systematically overcharging patients for services and overpaying executives. It's time for these practices to stop and for the state, and all of us, to pay fairly for hospital services.

The nation's health care system and its financing are changing dramatically. Connecticut must change as well; we can no longer afford annual double-digit increases to our hospitals. By taking advantage of the Affordable Care Act, we expect to see all our residents covered and better able to protect their families' health in the coming year and beyond.

Ben Barnes is the secretary of the state Office of Policy and Management.