Perdue suggests $81M in Medicaid cuts - Georgia

Faced with dwindling tax revenues, Gov. Sonny Perdue has proposed a 10 percent -- or $80.7 million -- cut in Medicaid reimbursements to Georgia hospitals.

The proposed Medicaid cuts, coupled with a decline in trauma care funding, stem from the governor’s decision to reduce his 2010 tax revenue forecast by $1.6 billion.

The cuts are a symptom of the flat-lined economy and the legislature’s reluctance to back the government’s proposed bed tax and provider fee.

The proposed Medicaid cut is expected to be magnified since hospitals will lose $2 in federal matching funds for every $1 in state Medicaid money that gets cut, said Kevin Bloye, spokesman for the Georgia Hospital Association.

“When you add the federal matching dollars,” Bloye said, “hospitals could lose an additional $120 million.”

The softening economy is draining the state’s three biggest revenue buckets -- corporate income tax, personal income tax and sales tax, Perdue spokesman Bert Brantley said.

“When people aren’t working, they aren’t paying an income tax; they aren’t buying things and paying sales tax; and the companies they work for aren’t making money, so they are not paying corporate income tax,” Brantley said. “It’s a vicious cycle that’s going to be a difficult one to break out of.”

Perdue’s proposal to raise $324 million by implementing a hospital and insurance provider fee failed to get traction in the legislature. The lack of that potential increase in state revenues, Brantley said, played a part in the governor’s decision to propose the Medicaid cuts.

The Medicaid cuts could be the “last straw” for some hospitals in the state, industry insiders said.

Hospitals are suffering from rocketing unpaid medical bills, a decline in high margin elective procedures, and the growing rolls of uninsured.

Indeed. More than six out of 10 Georgia hospitals have had to, or were considering, reducing staffing, according to a Georgia Hospital Association survey in January. More than one out of three hospitals have had to, or were considering, reducing services.

Piedmont Healthcare, for instance, cut about 300 non-clinical jobs in the past year as the economy continues to crater. About a third of the affected jobs were occupied. A chilly economy and frozen credit markets have also forced Piedmont to delay plans for a $194 million hospital in Newnan and halt capital expenditures, except for construction projects under way or emergency equipment needs.

Hospitals, such as Grady Memorial Hospital, have a disproportionately large share of Medicaid patients and have the most to lose, Bloye said.

“Grady will be the first on the list as far as the pain,” he said.

A Grady spokeswoman declined to comment.

Georgia is expected to receive more than $1.7 billion in Medicaid funding over the next couple of years. While that was expected to fill the $208 million Medicaid shortfall, the money is expected to be redirected to non-Medicaid state expenses.

“We can see hospital closures, we can see major damage to large hospital systems and we can see individual physicians who are getting out of the business, all because we didn’t take the stimulus package money and use it directly for Medicaid,” hospital lobbyist Jimmy Lewis said.

The stimulus money doesn’t come “close” to offsetting the tax revenue hit facing Georgia, Brantley said.

“Over the 2009 and 2010 budgets as we have recognized the stimulus money, we have cut an additional $1 billion of spending,” he said.

Lawmakers might be hesitant to green light Perdue’s proposed Medicaid cuts because they can’t afford to have hospitals close in their district, Lewis said.

“What a governor does relative to the state budget, versus what a legislator does to his local constituency,” Lewis said, “may be two completely different approaches.”

source