Connecticut cost shift becomes permanent – State Report

Connecticut cost shift becomes permanent – State Report – Column

Eric Zicklin

Connecticut employers are not happy. The cost shift they have borne for the hospital care of impoverished residents is now a certainty under a law that became effective in January.

Because hospitals overcharge paying patients to cover the bills of those who can’t pay, employers absorb the costs of indigent care every time they pay the hospital bills of their employees.

For every 80 cents of hospital services, 20 cents is tacked on to the bill to recapture Medicare and Medicaid shortfalls and bad debts, according to the American Hospital Association, in Chicago. These shortfalls totaled $225 million in 1991, of which $79 million was attributed to Medicaid.

A partial solution

To address this disparity, the Connecticut legislature created an uncompensated-care pool that makes hospital overcharges uniform across the state. Since January 1, all of Connecticut’s 34 acute-care hospitals have been charging 30 cents per 70-cent billing to cover indigent care. Where the overcharges used to be retained independently so that each hospital balanced its own accounts, now the percentage is set annually by the state’s Commission on Hospitals and Health Care.

About 20 hospitals receive less money than they put into the uncompensated-care pool in Hartford, but all are able to continue offering care. The new system handles a flow of about $6 million per week and redistributes the money to the hospitals within 24 hours.

“Hospitals serving poorer communities were bumping up charges by 50 cents for every 50 cents of care,” says Don Pogue, member of the Commission on Hospitals and Health Care. “That doubles the price. How could they possibly compete with the hospitals that were charging only an extra 20 cents on 80 cents of care?” he asks. “By spreading the burden of uncompensated care across all the hospitals, we believe the playing field is leveled.”

Hospitals are concerned

Norm Pattis, assistant vice president of government relations for the Connecticut Hospital Association, in Wallingford, said although the system seems to be working well, the hospitals can’t be assured that the matching funds will be used to pay for uncompensated care. Despite the fact that the hospitals have so far received prompt payment from the fund, Pattis says, “Connecticut hospitals operate on a razor thin margin of less than 1%, and half the hospitals in Connecticut lost money treating patients last year, so our cash flow is critical.”

Seeking federal funds

But the uncompensated-care pool was created for another reason, too. “For ages,” Pogue explains, “the Medicaid structure has allowed states to seek federal matching funds for the money that covers bad-debt patients. But we can’t even apply for the funds unless there is a state wide system in place to pay for uncompensated care.”

Connecticut expects to hear by summer whether the Health Care Financing Administration will provide the matching funds, estimated at $100 million per year. “We’re eager to bring that new federal money into the state,” Pogue says.

But Jan Spegele, vice president of the Connecticut Business and Industry Association, Stamford, says “According to the legislation, the matching funds, if they really arrive, don’t have to go to indigent care. They don’t even have to go near the health care system.”

Pogue acknowledges that the federal money will go straight to the state’s general fund, but “the money may get to the hospitals. It may not.” (According to estimates, Connecticut’s budget deficit in 1991 reached $175 million.)

Still, it’s the uncompensated-care pool’s tacit formalization of employer-supported indigent care that irks the CBIA most. “Our 7,000 member companies consider the health care of the impoverished public policy issue not a business issue,” Spegele explains, “yet the state legislature has locked us in as the financial providers for anyone who can’t pay for his care.”

Pogue denies this charge. “Payers have always paid for non payers and the pool hasn’t changed that,” he says.

COPYRIGHT 1992 A Thomson Healthcare Company

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