Pinch of Medicaid Cuts Sets in Today

Medicaid cuts hit today across South Dakota.

Nursing homes, social agencies and South Dakota’s largest hospitals will absorb the loss of $42 million after emergency steps this year to balance the state budget.

The cuts arrive with the July start of the new fiscal year. Agencies in turn expect to delay capital improvements, raise rates, freeze wages or leave positions open.

“This is going to hurt. We’re going to deal with it and hope for the best,” said Dr. Dan Heinemann, an assistant vice president at Sanford Health in Sioux Falls.

Consumers will see no loss of service, officials said.

“We hope our consumers and residents won’t notice anything,” said Linda Studer, executive director for Good Samaritan communities in Sioux Falls. “We want it to be seamless,” she said.

But that will last only so long, she said. The Good Samaritan Village at 46th Street and Marion Road, home to 186 elderly residents, will lose $15,000 a month in Medicaid money, or $180,000 a year. Managers there will take a variety of steps to tighten the belt. They expect to reduce residents’ weekly outings to places such as the zoo and Falls Park. They might raise rates on private-pay residents, now about $180 a day, to subsidize residents on Medicaid. And there might be fewer staff members in the halls for Good Samaritan, which employs 600 people at three Sioux Falls facilities.

“Right now, we’re looking at not filling positions as people resign. Likely we’ll freeze wages,” Studer said.

Medicaid is a state-federal partnership that covers costs for low-income children and adults who need doctor visits, X-rays, prescriptions and other services. It also covers room and board and daily assistance for most residents in South Dakota’s 107 nursing homes. It is distinct from Medicare, a separate federal benefit for people mostly of retirement age.

Cuts this year come after two years of freezes in Medicaid money and as the economy tries to shake the recent recession. Workers have been feeling the effects for several years. Employee raises at Good Samaritan, typically 3 percent, were 2 percent or less last year and now might be nothing.

Avera McKennan Hospital cut wages early in the recession. It since restored those cuts and gave workers a raise but now will again examine all pay adjustments.

“We hope to give merit increases, but it really depends on how hard this hits,” Daryl Thuringer, Avera vice president of marketing and public relations, said Thursday.

It could have been worse. Gov. Dennis Daugaard pushed in January for 10 percent state budget cuts across the board, including services needing Medicaid. Legislators were able to shave that down to the neighborhood of 6 percent, and in so doing spread the pain around at differing rates.

Nursing homes ended up with cuts of 1.8 percent to 4 percent, depending on what share of their residents are on Medicaid.

Dentists, chiropractors and optometrists lost 6.4 percent. Ambulances lost 5.1 percent.

Hospitals had the largest spread. South Dakota’s 10 biggest medical centers – where about one in eight patients are on Medicaid – lost 11.48 percent of their Medicaid money. The 38 hospitals serving smaller communities lost nothing.

“They felt the larger hospitals had more room to absorb the cuts, that larger hospitals had more wiggle room, in an attempt to support smaller facilities,” Heinemann said at Sanford.

He wouldn’t say whether that was a fair outcome.

“I don’t have any comment on that. It’s unfortunate Medicaid got cut at all. It is what it is,” he said.

The 11.48 percent hits Sanford in one place, its flagship hospital in Sioux Falls. It hits four hospitals in the Avera network, in Aberdeen, Sioux Falls, Mitchell and Yankton. The one-year hit at those four Avera units will top $7.5 million, Thuringer said.

Medicaid cuts are a double whammy because federal matching money disappears. A 10 percent cut would have been $30.3 million in Medicaid money from the state general fund and another $40 million from the federal government, or a $70 million total.

Officials softened the blow by finding $12.2 million in the general fund to reduce the state cuts to $18.1 million. The loss of federal match fell to $24.6 million, leaving the total loss at $42.7 million, said Ken Senger, vice president of the South Dakota Association of Healthcare Organizations. The 10 big hospitals are absorbing $21 million of that.

The smaller loss is a relative gain. If the economy improves, the squeeze may ease by next year. But at the same time, demand for Medicaid is increasing.

“Someone clearly has to pay,” Senger said. “Those costs are shifted to other payers to the extent they can. Oftentimes, that’s you and me through purchasing health insurance or through employers who provide health insurance.”

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