Budget Cuts Devastate Health Care Safety Net

April 2011

The state budget makes dramatic cuts to Washington State's health care safety net and will cause real pain for vulnerable people and the health care providers who serve them. Hospitals will experience a major increase in demand for charity care and emergency room services, while enduring significant cuts in payments. The burden of these cuts will also fall on poor children, seniors, people with disabilities, and low-income workers. Middle-class workers who have private pay insurance will be affected as hospitals are forced to shift to them the cost of state underpayments.

The list below describes how the final budget resolves each of WSHA’s priority issues and selected other key items. Savings figures reflect state and federal funds; many programs receive federal match.

• Hospital Safety Net Assessment: Breaches the agreements made last year on the assessment and takes a total of $261 million that should be used to fund essential hospital services for Medicaid patients. The $261 million includes $221 million in cuts to hospital Medicaid rates at large non-public hospitals and takes for the state the current $40 million surplus in the safety net assessment account. (Cut: $261 million)
• Basic Health: Limits eligibility to those who will be covered by the 2014 Medicaid expansion; disenrolls immigrants; and further reduces enrollment in the subsidized health insurance program from the current level of 38,475 to 33,000 people by 2013. (Cut: $202 million)
• Disability Lifeline: Continues the medical portion of this temporary safety net for the disabled poor, but changes the cash grant program into a housing assistance program. (Cut to cash grant: $80 million)
• Apple Health for Kids: Continues current eligibility for children covered through Apple Health for Kids. Immigrant children with family incomes above 200 percent of poverty must pay the full cost of their premiums. Also establishes a new Disproportionate Share Hospital (DSH) program to provide $2.8 million for inpatient and outpatient services for children not eligible for Medicaid or the Children’s Health Insurance Program. (Cut to Apple Health: $1.6 million)
• Regional Support Networks: Cuts funding for state patients receiving mental health services through a $17 million cut for Medicaid services and an $8.7 million cut for non-Medicaid services. (Cut: $25.7 million)
• Health centers/clinics: Cuts payment rates for federally qualified health centers and rural health clinics less than either the Senate or House proposals. Cuts are achieved by reducing the inflation factor used to set payment rates for the 2011-2013 biennium, but current cuts remain for the last quarter of the 2009-2011 biennium. For rural health clinics, payments will be increased for prenatal and well child visits. (Cut: $86 million for all clinics with an offset of $6 million for rural clinics)
• Maternity support services: Cuts funding by 30 percent for services that improve birth outcomes for at-risk pregnant women. (Cut: $24 million)
• "Non-emergency" visits: Limits payments to three per year for so-called "non-emergency" emergency room visits for Medicaid patients. Many of these non-emergency conditions could be life threatening or lead to permanent disability. (Cut: $72 million)
• DSH payments: Preserves the indigent assistance DSH program, but reduces payments for both the indigent assistance and low income DSH programs by 40 percent. (Cut: $29 million)
• Managed care: Achieves savings in the Healthy Options program by expanding it to include elderly and disabled clients and using a competitive procurement process. (Cut: $75 million)
• Medicaid demonstration waiver: Seeks federal approval for a waiver to allow flexibility in the Medicaid benefit package and provider payment policies. (Cut: $18 million)
• Payment for services: Requires prior authorization for advanced imaging services; requires prior authorization for some surgical procedures; and seeks to reduce unnecessary cesarean sections. (Cut: $8.7 million)