Michigan hospitals, health care providers brace for governor’s Medicaid cuts

Gov. Jennifer Granholm’s decision to cut millions from the state’s Medicaid budget will lead to an even greater loss in health care funding.

Granholm, who on Tuesday handed down an executive order slashing $304 million from state agency budgets, and the legislature agreed to cut $16 million from the Medicaid fund that reimburses hospitals and physicians for treating poor patients, or about 4 percent of the budget. But this cut will be multiplied by a concurrent reduction in federal Medicaid matching dollars: for each dollar the state spends on Medicaid, the federal government contributes $2.30, according to the Michigan Health and Hospital Association.

That means the Washington will not contribute $36.8 million to Michigan’s Medicaid fund. Now the fund will have $52.8 million less in its coffers between the state and federal cuts.

MHHA Executive Vice President David Seaman said his association told Granholm cutting Medicaid is bad social policy because it hurts Michigan’s most-vulnerable persons and bad fiscal policy because it means less money from the feds when Michigan needs every dime it can get.

“We are troubled because this action doesn’t seem to fit with the idea of good public and fiscal policy,” Seaman said.

Seaman said the first result of the Medicaid cut will be longer waits in emergency rooms as outpatient programs, nursing homes and physicians accept fewer Medicaid recipients and they then head to the ER as the last choice for care. Seaman said over the longer term hospitals will lay off employees and will cut “non vital” services.

That’s just what McKenzie Memorial Hospital in Sandusky County did when it closed its obstetrician department that treated mostly Medicaid mothers.

“Most of the obstetrics that we were experiencing were Medicaid moms and it made no sense to continue to try to offset that deficit related to continuing to deliver those kids,” McKenzie’s chief executive officer Steve Barnett said.

Medicaid pays generally less than the cost of the services provided to its patients, Barnett said, and the state and federal cuts will underfund Medicaid treatment even further.

Barnett said he does not intend to lay off employees, but hospitals in the state may provide fewer beds to patients if they continue to be underfunded.

The Detroit Medical Center will likely be hit hardest by the Medicaid cuts because it is the largest provider of Medicaid services in Michigan. Even a relatively well off hospital system like the University of Michigan’s Hospital and Health Centers will feel the effect as neighboring DMC facilities feel the strain.

“Although the U-M Health System is in relatively good financial condition at this time, many of our state’s hospitals are in dire financial straits, and this cut will be the cause of more red ink,” UMHS Chief Executive Officer Doug Strong in a statement. “As a safety-net hospital that provides care for people from every county in the state, UMHS will continue to work with the Michigan Department of Community Health to assure that there are no gaps in access or coverage for this vulnerable population.”

About 1.7 million Michiganders are enrolled in Medicaid, a record high. The Michigan Health and Hospital Association said 6,000 people are added to the Medicaid rolls every month and another 1,500 go uninsured every week as layoffs mount.

FOR FULL COVERAGE on the specifics of Tuesday’s budget cuts, see the following stories:

» With revenues down 21%, state officials announce $304 million in cuts

» Actual budget cut is $304 million, not $349 million

» Senate Appropriations Committee moves Executive Order 2009-22 out of committee for floor vote

» DEQ to weather today’s cuts without reducing services

» Arts groups brace for cuts

» Michigan State Police union looking at ways to soften blow of governor’s budget cuts