Proposed Maryland Medicaid Caps Could Hammer DC Hospitals

Proposed Medicaid caps could hurt D.C. hospitals

Premium content from Washington Business Journal – by Ben Fischer

Date: Friday, March 11, 2011, 6:00am EST

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Health Care, Insurance

Maryland politicians’ budget-cutting knives aren’t stopping at the state border.

D.C. hospitals are furiously lobbying against Gov. Martin O’Malley’s proposal to cap payments made by Maryland’s seven Medicaid contractors to out-of-state hospitals, saving the state a projected $12.4 million in 2012.

If approved, the law would cut revenue at Children’s National Medical Center by $15 million, said lobbyist Clare Kelly, who developed the estimate by calculating last year’s revenue under the proposed new rules.

Other major providers of care for Maryland residents — such as Providence Hospital in Northeast D.C., United Medical Center in Southeast and Washington Hospital Center in Northwest — would all likely see revenue drops as well.

Like almost every other state, Maryland places most of its residents covered by Medicaid into plans run by private insurance companies. Armed with set payments from the state, the insurers carry the financial risk and must negotiate rates directly with hospitals.

Under O’Malley’s plan, Maryland would cut its payments to the contractors. In turn, contractors would be forbidden to pay D.C. or Virginia hospitals rates higher than the state’s reimbursements for patients insured directly by Maryland.

O’Malley spokesman Shaun Adamec said the changes are meant to bring District hospitalization costs in line with Maryland rates and the administration is open to discussing alternatives.

D.C. hospitals argue that aside from the financial impact on them O’Malley is also undercutting one of the original purposes of Medicaid managed care contracting: to save taxpayer money by allowing private sector players to negotiate with each other.

“The proposed policy establishes the unacceptable precedent of allowing the state to interfere with the hospitals’ ability to negotiate their rates,” wrote Robert Malson, president of the D.C. Hospital Association, in a letter to lawmakers.

Health care providers throughout the country, including in Maryland and D.C., have struggled to prevent cuts to public insurance plans during the recession and the resulting government budget crisis. In 2010, Virginia contemplated, but did not enact, similar restrictions on out-of-state hospitals, Kelly said.

Hospitals would reconsider their participation in the Maryland program if it passes, Malson said. If D.C. hospitals stop contracting altogether with Maryland plans, that could further stress hospitals in Prince George’s and Montgomery counties.

The proposal could benefit the seven Medicaid contractors in Maryland, which include plans run by UnitedHealthcare and MedStar Health, the owner of Washington Hospital Center.

Kevin Wrege

Founder & President

Pulse Issues & Advocacy LLC

Office: 202-625-1787

Mobile: 202-253-4929

4410 Massachusetts Ave., NW, #150

Washington, DC 20016

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