Loss of Medicare funding threatens health care for Hawaii’s elderly

Now that the U.S. Supreme Court has taken the Affordable Care Act (ACA) out of limbo, Hawaii policymakers must grapple with inequities in the law — because if they don’t, over the next 10 years, the state’s health care system could suffer significant implosion in much-needed health care resources.

The implosion, which began in earnest in 2010, is coming from care we provide to our senior citizens.

Across-the-board national Medicare cuts and massive underpayments have Hawaii headed for a $3.3 billion hit, Hawaii Health Information Corp. (HHIC) research shows.

Our senior citizens are a huge and growing part of our hospitals’ patient load. Last year, Medicare beneficiaries received inpatient care costing more than $700 million; that’s about 44 percent of all inpatient care costs in the state. Of nearly $1 billion spent in emergency room care in Hawaii last year, more than 22 percent was for Hawaii’s Medicare beneficiaries.

HHIC’s projections of $838 million in ACA reductions between 2010 and 2024, on top of the $2.5 billion in underpayments in that same period, jeopardize the financial stability of all Hawaii’s hospitals. It is already bleeding state-owned hospitals.

Why did the ACA make such drastic cuts; how do they affect Hawaii; and how should we respond to major reductions in a key program that finances much of the hospital care in Hawaii?

The goals of the national ACA are important and beneficial: control increasing costs of the program, stabilize the Medicare Trust Fund and expand health care coverage to the uninsured. The ACA strategy requires provider-payment reductions to reduce waste and inefficiency. In many parts of the country, lower Medicare reimbursement rates should result in better efficiency without sacrificing the quality or availability of care. However, the ACA cuts will land disproportionately on Hawaii.

Historically in health care, Hawaii has been a low cost area. Unlike many parts of the mainland, Hawaii has not over-built inpatient hospital facilities. Every one of Hawaii’s hospitals is not-for-profit or publicly owned; many states have large, for-profit facilities that encourage high utilization. Hawaii’s major health insurance carriers are also not-for-profit; aside from administrative costs, insurance premiums go to care, not corporate profits.

Hawaii’s physicians have traditionally favored primary care over costlier inpatient treatment, in comparison to many mainland colleagues who tend toward inpatient and specialty treatment. Beyond health care services, Hawaii’s clean air, overall climate and environment support good health. As a result, Medicare spends less on care in Hawaii than it does in all but one other state — Alaska.

Unfortunately, the ACA reductions are not calibrated to account for these differences; regulations on payment reductions treat all states alike. The highest cost areas, such as those in Louisiana or Florida, will find cuts based on the same formulas as Hawaii. With a low-cost system, however, Hawaii’s providers have a lower margin from which to take these ACA reductions. Compare it to a 100-pound woman and a 300-pound woman each losing 15 pounds. For one, it is 15 percent of body weight; for the other, it’s 5 percent.

For health care in Hawaii, these cuts are currently made up by payers like HMSA absorbing the costs into the rates they pay to the hospitals for the care of private insurance patients. Alarmingly, if this practice were to stop, the underpayment could result in lower quality care as some providers lose the ability to pay for the latest treatments and technologies and others retire, leave or go out of business.

This problem will neither go away with time, nor is it one that the hospital sector can resolve on its own.

The solution will require community-wide efforts, including government. As a state, we need to develop, and then make a case to the federal government for special measures that address this Medicare imbalance. This effort needs to be initiated as soon as possible and given extremely high priority. The quality of Hawaii’s health care future is at stake.