Healthcare Reform Federal, But Effects Will Be Local

By Desiree Parker Thursday, April 08, 2010

The federal healthcare reform bill signed recently by President Obama will have some immediate and long-term consequences for the state as well as Triangle residents. This is the first of two stories explaining what the effects of reform may be on Virginia and the Historic Triangle.

Change is coming to the nation's healthcare system, and its arrival will force the state to re-examine how it provides healthcare to the poor and disabled.

Some of the major aspects of the federal bill include an expansion of Medicaid coverage for people with incomes up to 133 percent of the federal poverty level (about $29,000 for a family of four); subsidies to help certain families afford insurance and services; tax credits for small businesses providing insurance; key market reforms and improvements to the Medicaid system. While some changes will take place right away, others will not take effect until 2014 (see breakout for details).

This legislation will force the state to re-think parts of its recently released budget, now awaiting the governor’s approval. In that budget, funding for Medicaid - the health assistance program for the poor and disabled with joint federal and state funds - has been cut, as have provider reimbursement rates.

The federal bill calls for states to maintain their programs at current levels, but the state cuts are poised to affect about 780,000 Virginians enrolled in the Medicaid program as well as the nearly one million residents who are uninsured.

About that state Medicaid program: Virginia spends little on it, ranking 48th out of 50 nationally in per-capita Medicaid spending, and has one of the most restrictive eligibility requirements for both Medicaid and the state’s insurance program for poor families, called Family Access to Medical Insurance Security.

Like other states, the recession has caused Virginia enrollment in these programs to increase as people lose jobs and insurance. Costs have soared even as cuts to the program have become necessary since the state ruled out options to cover increased healthcare costs for its poor.

The state program, however, was saved from earlier cuts during the recession thanks to $1.4 billion in federal stimulus money, which increased the federal portion of Medicaid funds and reduced the state’s portion.

That stimulus cash is due to run out December 31, which will leave the state with much higher demand and no immediate way to pay for it. One ray of hope is some federal legislation being considered that might grant a six-month extension to the stimulus to support Medicaid, which could mitigate state cuts.

According to Michael Cassidy, Executive Director at the Commonwealth Institute for Fiscal Analysis, the state “could dodge a bullet” if it receives the federal extension, but this will only allow the state to limp along until the end of the year.

The new federal healthcare bill means the state will have to remove some proposed Medicaid cuts to areas like waiver reductions, eligibility reductions and long-term care cuts in order to meet “maintenance of effort” requirements. However, the state can save money by cutting away at provider reimbursement rates, Cassidy said.

In response to the state legislature’s budget bill approved last month, the president of the Medical Society of Virginia told the General Assembly doctors will likely have to reduce the number of Medicaid patients they see. In a recent survey by the society, two-thirds of physicians said they would reduce the number of Medicaid patients they see or would stop treating Medicaid patients altogether.

If fewer providers accept Medicaid, this will likely mean more trips to the emergency room for people who can’t get care (meaning taxpayers will ultimately foot the bill) or more trips to cash-strapped free clinics, like Olde Towne Medical Center and Lackey Free Clinic in the Triangle.

Tomorrow: Even with the extension of federal stimulus dollars, the state will have to grapple with an enormous funding gap in 2012 and 2013 while maintaining its Medicaid program. Rene Cabral Daniels of the Williamsburg Community Health Foundation talks about the reforms' effects on healthcare in the Triangle.