Cuts to Medicaid will Ultimately Hurt Business – Say Ahhh! A Children’s Health Policy Blog


By Jim Roche, President, Business and Industry
Association of New Hampshire

For years, business owners and managers have cited the
rising cost of health care and health insurance as their top challenge, after
the health of the economy. And for years, the Business and Industry Association
of New Hampshire has tried to do its part to address this critical issue
through a number of policy initiatives, including supporting transparency of
health care cost and quality information, fighting health care insurance
mandates and expansions of coverage, and advocating for adequate Medicaid
reimbursement to health care providers. But what does Medicaid funding have to
do with the cost of private health insurance and why should business owners pay
attention to how the state funds Medicaid?

Medicaid provides insurance-like health-care coverage for
low-income children, pregnant women, disabled and elderly individuals. In New
Hampshire, there are about 120,000 individuals enrolled in Medicaid. The
program has a total budget of about $1.6 billion, the second largest state
budget item after education. Medicaid is a 50-50 federal-state partnership,
where the federal government matches each state’s Medicaid expenses dollar for
dollar. Medicaid reimbursement rates paid to health-care providers, such as
hospitals and community health centers, are set by the state.

In New Hampshire, health care providers receive much less
than the cost of caring for Medicaid patients, in some cases less than 50 cents
per dollar of care. When providers receive less than 100 percent of the cost of
treating Medicaid patients, they must make up the cost of caring for these
individuals another way. Often a provider will charge more for commercially
insured individuals, which in turn increases the cost of their care and the
claims paid by their insurer. This is where a cost-shift occurs and why
business must pay attention.

Cost-shifting simply means that providers shift the
under-compensated portion of the cost of providing care to some groups of
individuals (Medicaid patients, Medicare patients, uninsured patients) to other
payers – principally those buying commercial insurance. And business is the
largest purchaser of commercial insurance. The New Hampshire Center for Public
Policy Studies
estimates that as much as 25 percent of an insurance premium is
the result of cost-shifting. In other words, a business owner’s cost of
providing insurance to employees is 25 percent higher because of
under-reimbursement from public payers and charity care.

It is important that the business community understand
this phenomenon and make sure policymakers understand it as well. This is a
significant and growing expense for business. The BIA recognizes that our
health-care system is complex and there are many factors that contribute to
high costs and unaffordable insurance premiums. Nonetheless, health care
cost-shifting is one of them and inevitably leads to higher business expenses.

The state can help control cost-shifting by ensuring that
hospitals and community health centers are adequately reimbursed for treating
Medicaid patients and the uninsured. Legislators can directly impact insurance
rates for businesses by adequately reimbursing health-care providers for
Medicaid services.

Although it won’t eliminate the cost-shifting problem,
nor does it solve the issue of healthcare affordability as a whole, it will
have a positive impact on businesses struggling to maintain a health insurance
benefit for their employees.

We realize legislators are grappling with a huge budget
deficit and will have to make many tough decisions. We also remember the pledge
from majority party leadership early in the legislative session to create a
better climate for business. And while we are heartened by the unlikely
scenario of business tax increases anytime soon, we nonetheless respectfully
remind legislators to consider carefully the impact that reducing funding for
Medicaid and uncompensated care to New Hampshire’s health care providers will
have on New Hampshire businesses – job creators who are paying the bulk of the
health insurance bill for their employees.

(The Business and Industry Association is New Hampshire’s statewide Chamber of Commerce.  This post originally appeared in the Concord Monitor.  The views expressed by guest bloggers do not necessarily reflect the views of Georgetown University Health Policy Institute’s Center for Children and Families.)

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