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Medicare underpayments, inflation hit hospitals and their patients hard

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When does winning a race turn out to be bad for business? When you are a Hawaii hospital in 2015, in the new era of the Affordable Care Act (ACA).

As noted in the Hawaii Health Information Corp.’s June report, "Ouch! Mounting Medicare Cuts Hurt," Hawaii hospitals are suffering under tremendous Medicare cuts.

The problem is even broader, as the $2.5 billion in Medicare underpayments (2010-2024) mentioned in the report do not include losses to hospitals from Medicaid, Medicare Advantage or the uninsured. To make matters worse, Medicare payments are not keeping pace with inflation, so unless something changes, these deficits will widen every year. The strains of this can be seen in the publically run health care system and in some private providers, including hospitals, home health, durable medical equipment providers and hospice.

Medicare cuts are just one piece of the puzzle, one that shows a tremendously difficult fiscal environment of all health care providers in the state, not just hospitals. The irony is that part of the reason Hawaii is in this difficult position is due to the forward thinking of state leaders who passed the Hawaii Prepaid Health Care Act (PHCA) in 1974 and QUEST program implementation in 1994.

When the Affordable Care Act was passed in 2010, one of the main aims was to expand coverage to uninsured Americans. There were federal incentives to help states achieve that goal. These incentives were also meant to help offset the cost of Medicare cuts. The problem is that with PHCA and QUEST expansion, Hawaii was already inches away from the finish line, so it could only receive a small fraction of the federal incentives to do better.

Hawaii is also a very efficient state in terms of medical care delivery, which means we are already doing more with less, and this makes cuts more painful here.

Medicare is 100 percent federally funded. The same formula applied in Iowa, Montana and other low cost states is applied here, not taking into account the higher cost of doing business here including higher shipping, utility and capital costs. All Hawaii hospitals are nonprofit or government run, and in order to keep their nonprofit status, they must accept Medicare payment rates, which are non-negotiable.

Hawaii needs to be recognized differently by Medicare based on its geographic isolation and higher costs. We are grateful to have a congressional delegation that understands this, and is working hard on behalf of Hawaii at the federal level. Congress achieved a big step in relief from Medicare cuts in the recent "doc fix" victory which stopped an impending 21 percent cut in payments to doctors who treat Medicare patients.

We are hopeful that something can shift on the federal landscape to recognize Hawaii for its position at the finish line, to keep Hawaii’s health care providers and patients winners for decades to come.

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