Stimulus Provides More Emergency Aid to Health Care Industry than Job Creation

When lawmakers finally get around to approving the America Recovery Act of 2009, the health care sector appears poised to get more than $100 billion. With the exception of $20 billion earmarked for health information technology improvements, health policy experts and analysts say most of the funding is more about saving jobs than creating new ones.

“It’s mostly emergency assistance,” said Robert Blendon, a professor of health policy and political analysis at Harvard University. “Even the funding for research is to stabilize (hospitals) because they’ve lost endowments and private gifts.”

Either way, the health care expenditures fulfill President Obama’s goal of creating or saving jobs and could save thousands of Americans from some financial perils associated with losing their jobs and health insurance. And the health care industry won’t likely complain. Although republican lawmakers in the Senate have balked at funding for family planning and Medicaid assistance for people receiving unemployment insurance, so far they have left intact most of what the American Hospital Association went shopping for to help hospitals struggling with weak operating margins and rising bad debt expense from treating more uninsured patients.

States could receive upwards of $125 billion for Medicaid, including more than $85 billion in temporary matching funds to help insure those applying for state aid. If approved, the funds would buttress a nearly $35 billion expansion of funds for the State Children's Health Insurance Program (SCHIP) signed into law Thursday by President Obama.

“The key component is funding for Medicaid which will help prevent or replace cuts that have hit Medicaid and help the unemployed.  That’s a positive for hospitals because it will help mitigate bad debt expense,” said Lauren Coste, a director for Fitch Ratings covering For-Profit Health Care Facilities.

Likewise, lawmakers appear set to provide subsidies to help newly unemployed workers afford private insurance through COBRA, which pays more and sooner than Medicaid.

But the aid may be too late for some hospitals to survive.  Last year, Moody's Investors Service downgraded more than 50 not-for-profit hospitals.  In January, Fitch Ratings predicted in a note to investors that not-for-profit hospital credit ratings will more often drop than rise through July 2010 or January 2011.  And many experts are predicting another round of industry consolidation.

Meanwhile, Richard Clarke, president of HFMA, said Wednesday during  Kaulkin Ginsberg’s recent conference call, “The Changing Face of Medical Receivables—and What It Means for Your Business,” that healthcare financial managers are concerned that the industry is starting to shift away from private payment to more public payment.

“The potential of decreased margins is even worse,” Clarke said, referring to Medicaid’s history of paying late and below costs.  “Some uninsured will be covered, but shifting from private to public is troubling given the track record we’ve seen on the public side.”

Still, Blendon said hospitals that have plans to upgrade their health information systems can put vendors to work immediately with the money tagged in the stimulus plan for information technology improvements. Even those hospitals that don’t have a plan yet will have two years to tap into the funds.   

“The IT side can move faster than the construction. (Hospitals) probably could put together a plan within six months that would qualify (for the funding),” Blendon said.