On-the- Money Analysis Romney’s Budget Doesn’t Resolve Free-care Issue
Free care isn’t free.
Yet, with the unveiling of Gov. Mitt Romney’s state budget plan for fiscal year 2005, medical administrators throughout Massachusetts are wondering whether the governor realizes this.
They’re certainly wondering where the money will come from to care for uninsured or underinsured patients. The money to provide hospital care for these individuals has come from a vehicle called the uncompensated care pool — but health professionals have complained for years that the state has not done its part to bolster the solvency of that pool, instead gradually reducing its contribution.
And the new budget proposal, they say, does nothing to answer these concerns. In his own budget message, Romney makes it clear that the free-care situation is not a priority.
“Over the past decade,” the governor said, “our state has drifted far away from its core mission. The Commonwealth has granted free, subsidized services far beyond any definition of real need and in excess of our ability to pay for it.
“To give just one example, for every three taxpayers, there is one person getting free health care. This is not fair, and it’s not right. Without a new vision of shared responsibility, where every family contributes something to its own well-being, surging costs will overwhelm us all.”
That language doesn’t change the fact that, due to rising insurance costs and sluggish job recovery, more citizens are making use of free care resources in hospitals, said Dr. Charles E. Cavagnaro, president and CEO of Wing Memorial Hospital in Palmer.
“All hospitals are experiencing strain on their free care budgets,” he said. “We’re already about $700,000 to $800,000 over budget on uncompensated care in the first few months. Our actual operational margin is around $300,000, and when you deal with margins that are so low and you’re behind $700,000 on free care, you’re not going to do well. That’s why most hospitals in Massachusetts lost money last year, and why more will lose money this year.”
That’s a story the medical community has heard for a number of years in the Commonwealth — and it’s a story that’s not changing.
Growing Strain
To Cavagnaro, the fiscal well-being of the health care sector — an industry which is the state’s top employer — impacts entire regions, both from a jobs and a service perspective.
“I have to advocate on behalf of hospitals,” he said, “but it’s a strain on all doctors and the people who work at hospitals. If we don’t have money, we can’t give it out in raises or hire new help. If hospitals are in poor financial shape, we can’t implement new programs or bring in new providers, and in the worst-case scenario, hospitals have to close. It affects the entire community.”
But hospital leaders aren’t the only ones crying foul over Romney’s lack of attention to the free-care problem. The Massachusetts Association of Health Plans (MAHP) complains that, by shifting more of the free-care burden to insurers, the state is making it more difficult for patients and their employers to afford health insurance.
Specifically, the budget increases health plans’ contributions to the uncompensated care pool by $7.5 million — this coming a year after health plans were required to increase their contributions to the pool from $100 million to $157.5 million. That’s a 65{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} increase between FY 2003 and FY 2005.
Dr. Marylou Buyse, MAHP president, noted that the FY 2004 budget included a provision by which the Romney administration would implement a series of reforms to improve the free care pool’s management and accountability on the state’s end. But those reforms have not been launched.
“Gov. Romney has claimed that reform can pay for additional services,” Buyse said. “But when it comes to health care, instead of saving money by reforming health care, this administration is simply shifting costs from government to health plans and, ultimately, to employers and consumers. These types of policies, which in essence are hidden taxes, do nothing but drive up health care costs, making health care more unaffordable for employers and employees.”
Cavagnaro argued, however, that the plight of hospitals is more severe than that faced by private insurers. “At least they can pass the cost on,” he said. “I can’t; we just have to go into the red or use up endowments if we have them — and Wing doesn’t have an endowment.”
Still, Buyse said, the key point is that Romney missed an opportunity to bring stability to the uncompensated care pool and provide relief to employers struggling to provide coverage to their workers.
“Shifting government costs to the private sector is neither reform nor cost-cutting,” she said. “To propose that the pool assessment be increased before the management reforms have been put in place is putting the cart before the horse. Employers should not be asked to pay another dime into the pool until these administrative reforms have had a chance to work.”
Treading Water
There are other reasons for the state to pick up a greater share of the pool cost, said Dr. Thomas E. Sullivan, president of the 18,000-member Mass. Medical Assoc. He called the state’s health care system very fragile as it is, and warned that continued underfunding — not only of free care, but general Medicaid reimbursements as well — is taking a serious toll on institutions’ fiscal health and, ultimately, quality of care.
“We recognize the state is in difficult fiscal straits,” Sullivan said. “But the fact remains that health care is still underfunded in Massachusetts. The governor’s proposed budget perpetuates a situation that has been existing for years. It is the height of irony that, in a state that has a reputation for some of the world’s best health care, we continue to fall short in health care funding.”
Cavagnaro added that, because of the rising cost of insurance and an economy only starting to come to life — Palmer’s unemployment rate, for example, is close to 7{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} — free care is a growing need, and hospitals are not able to keep up with the cost.
“A lot of companies are going without insurance, or in some cases providing very basic health insurance,” he said. “And free care is available to the working poor as well as those out of work, so more people are taking advantage of it.
Sullivan said the recent, severe flu season was one example of medical resources becoming stressed. “Hospitals and doctors offices were jammed with patients, straining our resources to the limits. We were fortunate to get through it,” he said. And as the number of uninsured in the state rises quickly, he added — noting that some estimates put the number at 500,000 now — the burden on hospitals will only become greater.
“As the cost of health care goes up, the cost of doing business goes up, and it becomes a vicious cycle,” Cavagnaro said. “It needs a major overhaul, and it has for a number of years. We can’t just keep trying to put Band-Aids on it.”
Bottom-line Blues
Sullivan argued that investments in public health are among the wisest the state can make. “An ounce of prevention has always been one of the best ways to cut long-term costs. Our public health infrastructure has been eviscerated in recent years and should not be subject to further cuts.”
Still, Cavagnaro said medical institutions can only do so much to stay afloat. At some point, he insisted, lawmakers must hold up their end of the bargain if the state’s respected health care system is to thrive.
“I’m not elected to fix this,” he said. “I’m a hospital administrator. My job is to carry out the mission of the hospital. The Legislature and the governor are failing in their responsibility to provide this resource.
“It’s been a real strain for everyone, but the blame lies squarely at their feet. The governor has admitted that he’s cost-shifting and throwing the burden onto the providers, but he can’t get away with that for long.”
For now, however, in the fight to relieve some of the fiscal strain on hospitals, the prognosis is not encouraging.
