Hospitals battle bid to rein in Medicaid

The Bush administration's new rules could cost N.C. hospitals thousands of jobs and millions of dollars

WASHINGTON - As the last months of the Bush administration dwindle away, the White House might yet face another showdown with the Democratic Congress, this one over changes in Medicaid rules that could affect millions of low-income children and adults.

In the past year, the administration has tried to change the rules in a way that would reduce Medicaid spending by $15 billion over the next five years. The federal-state program pays for health care for the nation's poorest citizens.

The rule changes have brought objections from health-care leaders across the country. But the Bush administration say the changes represent tighter controls on Medicaid's rising costs.

Some rule changes, which would be enacted around Memorial Day, would reduce payments to North Carolina by an estimated $320 million next year alone. Hospital leaders and local government officials across the country say that if Congress doesn't block the regulations, patients will lose, particularly the uninsured, who may be turned away.

The state hospital association says workers will be hurt, too. It estimates 3,000 to 6,000 hospital jobs could be lost, up to a thousand of those in rural areas.

Hospital leaders have enlisted among their champions Sen. Elizabeth Dole, a Republican running for re-election. Though one of Bush's closest allies in the Senate, Dole is challenging the White House over its plans for Medicaid.

"This was a hastily made change," she said.

The Bush administration says that the changes aren't at all hasty and that they come as part of a needed examination of a program suffering from what federal Medicaid chief Dennis Smith called "mission creep." The phrase refers to the expansion of Medicaid coverage to populations and services that the administration thinks a program for poor people should not cover.

"What really is the role of Medicaid? Raising these areas of concern is something everyone should be aware of," said Smith, director of the federal Center for Medicaid and Medicare Services. He pointed to past Government Accountability Office reports showing waste or shoddy oversight in various programs.

Examples of waste can be found in many states. In North Carolina, state officials realized in 2003 they had overpaid hospitals by hundreds of millions of dollars through the same payment program now being tackled by Smith's proposed rule changes.

Still, around the country, hospital administrators are meeting in boardrooms, calling on lawmakers and worrying about how to handle expected cuts from the latest rules. In Congress, members are holding hearings about the changes' impacts. Dole has been lobbying peers on the Senate floor.

Rural red ink foreseen

In North Carolina, half of the state's rural hospitals could find themselves running a deficit because of the Medicaid program.

"When you're trying to stretch, it's just crazy," said Laura Easton, chief executive officer of Caldwell Memorial Hospital in Lenoir. "It hurts bad."

Easton said her hospital would lose $1 million next year -- more than her $800,000 net operating income. These days, she walks the hallways of her hospital in the foothills of the Blue Ridge Mountains and wonders: Will she have to cut jobs when her emergency room is already full of flu patients? Will she have to trim obstetrical services when 70 percent of her new babies arrive on Medicaid?

"It's something I'm struggling with," Easton said. "On every delivery, I lose $744. That's before the million-dollar cut. I did 485 of those last year."

Some rural hospitals could close, said Thomas Galligan, deputy director for budget and finance within the state's Division of Medical Assistance.