March i996
Philanthropy Journal of North Carolina
Cullen Gurganus
Cutbacks
Continued from page 1
ing the pinch.”
WINNERS AND LOSERS
When the Philanthropy Journal
went to press, the House and Senate
still were debating proposals to sig
nificantly slow the growth of
Medicare and Medicaid spending in
order to balance the federal budget.
Some
Republican
leaders also
want to change
the entitlement
status of the
two health pro
grams by pro-
V i d i n g
Medicare on a
fixed-payment
basis and
transforming Medicaid into a block
grant program to states.
In North Carolina, the focus of
attention has been on Medicaid
spending, which rose by an average
of 23 percent each year between 1988
and 1993 because of hi^er numbers
of people enrolled in the program.
The number of North Carolinians
eligible for Medicaid rose from
481,100 in 1988 to more than 1 million
in 1994, because of an expansion of
coverage for low-income children and
pregnant women.
The state spends about $3.3 bil
lion a year - including $2.75 bUlion in
federal funds - on Medicaid. While
almost half of Medicaid recipients in
North Carolina are children, nearly
two-thirds of the state money spent
on the program is used for treatment
of the elderly and disabled.
State officials are worried that
Medicaid restructuring plans being
discussed in Washington are based
too heavily on enrollments and don’t
take into account spending per
patient - which in North Carolina
remains among the lowest in the U.S.
“There are
winners and
losers under
the current
proposals,”
says Barbara
Matula, the
state’s medical
assistance
director. “The
winners are
low-growth Barbara Matula
states with high [per-patient] costs
like New York and the losers are high-
growth states with low costs,” tike
North Carolina.
Late last year, Matula and other
officials successfully ai^ed for a for
mula change that would allow North
Carolina to include 73,000 new
Medicaid recipients as a basis for dis
tributing funds under a proposed
block grant system. But even under a
more favorable formula, the state
could still lose up to $4.2 billion in fed
eral funds over the next seven years.
While Medicaid block grants
would give states more flexibility over
spending, they also would eliminate
rides covering who is eligible and
what the rate of reimbursement
would be to health providers, Matula
says.
That’s a key concern for Tar Heel
hospitals, which are more dependent
on Medicaid dollars than are their
national counterparts.
Studies by the North Carolina
Hospital Association show Medicaid
discharges accounted for nearly 20
percent of the state’s 1994 acute-care
discharges, compared to a national
average of 13.8 percent.
On the other hand. North Carolina
hospitals were able to recoup only 80
percent of the costs of Medicaid ser
vices, compared to a national average
of 93 percent. Medicaid reimbimse-
ments are based on a number of fac
tors, including whether a hospital is
rural or urban and the level of local
market prices for medical services
and salaries.
BEARING THE BRUNT
At a recent meeting of the North
Carolina Health Reform Commission,
hospital officials and leaders of state
agencies described which institutions
they believe are most vulnerable to
Medicare and Medicaid cuts.
Among the most affected, they
said, will be rural hospitals, commu
nity health clinics and academic med-
ipal centers that have a hi^er-than-
average share of poor and uninsured
patients or spend added money on
teaching and research.
That assessment is no surprise to
Leo Petit Jr., chief executive officer of
Bladen County Hospital in the south
eastern comer of the state.
“Most mral hospitals have a larg
er share of the Medicare and
Medicaid business” he says. “To the
extent that there is money taken out
of those systems, it will really make it
difficult for mral hospitals. We don’t
have the war chests that big urban
hospitals do. And there are more
uninsured in rural areas because
most of the businesses here consist of
five to 10 people and they can’t afford
insurance” for employees.
Anticipating a period of shrinking
resources. Petit says Bladen County
Hospital - which has 62 general and
52 nursing home beds - is working
hard to reduce costs throu^ layoffs
and reassignments. The hospital also
is part of a nine-hospital alliance that
is seeking to attract managed care
contracts.
MANAGED CARE ERA
Along with looming government
cutbacks, the rapid growth of man
aged care in North Carolina is
increasing pressure on rural hospi
tals, community-based clinics and
academic health centers.
Under managed care, the practice
of “cost-shifting’ - paying for care for
the uninsured or for research pro
jects by shifting costs to other
patients - is no longer an option.
And because most health mainte
nance organizations serve healthy
populations and are attracted to
urban markets with large popula
tions, they are unlikely partners for
health-care organizations in rural
and under-served areas.
Some experts believe that man
aged care’s focus on cost and effi
ciency makes the system a useful
model for future Medicaid and
Medicare service delivery
“Many people believe that moving
those programs to managed care is
the way we will respond to these [pro
posed government] cuts and tiy to
save money,” says Ellen MacMillan,
vice president of the state hospital
association. “We think there’s just not
enough experience yet to know if that
is a proven thesis.”
Matula, the state’s Medicaid direc
tor, says her office is trying to create
interest in setting up local managed-
care systems for the disabled. An
experimental program that will offer
managed care to Medicaid recipients
in Charlotte should be off the ground
in June.
WHAT’S TO BE DONE?
Until firm decisions are made in
Congress about the future of
Medicaid and Medicare, many North
Carolina health-care leaders are
adopting a wait-and-see approach to
the issue. But some have responded
publicly
The state hospital association has
joined its national counterpart in lob
bying against government health
care reductions that it says are “too
deep, too fast” and unrestricted
Medicare block grants that could hurt
the quality of health care. The associ
ation also has called for an indepen
dent commission to handle restruc
turing of Medicare and Medicaid.
And the deans of North Carolina’s
four academic medical centers have
been meeting monthly to discuss
developments and plan ways to keep
state legislators “informed of the
value of academic medicine,” in the
words of James Thompson, dean of
the Bowman Gray School of Medicine
in Winston-Salem.
Despite the anxiety over federal
reductions, the state’s leading health
care funders say they have not yet
experienced a noticeable increase in
requests for grant money from hospi
tals and other health-care institu
tions.
“I think the increased numbers of
requests we have received are simply
because hospitals are doing more in
their communities, not because of
what is happening in Washington,”
says Eugene Cochrane, head of the
hospital division at the Charlotte-
based Duke Endowment.
Although Medicaid and Medicare
cuts will have an impact on the state’s
hospitals, Cochrane is optimistic that
most will survive.
“I have been doing this tor 15
years and the issue of hospitals clos
ing and going away has come up in
several different studies,” he says.
“In all honesty, we have not seen that.
Of course, the [hospital] institution
today is very different in terms of the
services and kinds of patients being
taken care of. That’s going to be
interesting to watch.”
One problem with the current
debate over Medicare and Medicaid is
that it ignores the issue of the unin
sured, says Petit of Bladen County
Hospital.
“From
everything we
see and under
stand, the num
ber of unin
sured is going
to rise,” he
says. “If
Medicaid and
Medicare are
cut back, where
do we get the
money to provide services for them?”
Others are concerned that deci
sions on Medicare and Medicaid fund
ing are being made based on misun
derstandings about which popula
tions the programs actually serve.
“The citizens of this country have
not been able to separate the ffiscus-
sion of welfare reform and Medicaid
cuts,” says state Sen. Beverly Perdue,
D-Craven. “Less than 25 percent of
the Medicaid dollar goes to that
dependent mother [on welfare]. Most
of it goes to health care for the men
tally ill and the elderly That’s been
my dilemma, trying to raise the con
sciousness of those in the General
Assembly that what we are actually
talking about is somebody’s mother
in a rest home or nursing home.”
For Remmes of the Rural Health
Group, the key issue is not so much
whether government-funded health
programs will change, but how fast
and far-reaching that change will be.
“I can do fine the way we are now,
we will survive. And I can do OK in
four to five years when everything
has shaken out,” he says. “I’m just
not sure how the transition will go.”
Beverly Perdue
Mckee
Continued from page 4
take a look at the increasingly com
plex system of home-loan origination
and closing, and how it can be
streamlined.
McKee has worked for Self-Help
since 1986. From December 1994
throu^ June 1995, she took a leave
to serve as transition director for the
Community Development Financial
Institutions Fund in the U.S.
Treasury Department. The Clinton
Administration created the program
to provide capital and assistance to
such lenders throu^out the U.S.
Coincidentally, McKee and
Lawrence Lindsey, the Fted governor
who serves as liaison to the council,
were classmates at Bowdoin College,
where they studied economics.
Among nine new members named
to the Fed’s Consumer Advisory
Council is Margot Saunders, manag
ing attorney for the Washington office
of the National Consumer Law Center
and a former attorney with the North
Carolina Legal Services Resource
Center and the Governor’s Advocacy
Council for Children and Youth, both
in Ralei^.
Todd Cohen
North Carolina Medicaid Payments
Percentage of Medicaid cases by payee for rural & urban hospitals
■ Medicare
I I Medicaid
H Private 3rd party payer
W Other gov't. & non-gov’t
ill Seif-Pay, indigent,
Charity
Urban Hospitals
Rurai Hospitals
MM
Source:
North Carolina Health
Information Network
Katherine R. .White
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