FRANKFORT — The state's hospitals, doctors and pharmacies are bracing for a possible 35 percent cut in Medicaid reimbursement rates if legislators can't agree next week on how to fix a shortfall in the program's budget.
On Friday, the Cabinet for Health and Family Services announced it was sending notices about the potential cuts — which would last from April 1 to July 1 — to providers who participate in the health care program for the poor and disabled.
More than 8,400 doctors' offices, 1,300 pharmacies, 300 nursing homes and 80 hospitals would take a financial hit that could bring layoffs if payments for treating Medicaid patients are slashed. Those same businesses might also stop serving Medicaid recipients, some providers warned.
"It will be devastating for us and the Medicaid patients we serve," said Jim Cherry, owner of The Medicine Shoppe, a pharmacy in Somerset. About 35 percent of The Medicine Shoppe's clients are Medicaid recipients, he said.
At the Children's Clinic in Somerset, about 60 percent of patients seen by seven pediatricians are on Medicaid, said Dr. Dana Gibson.
"Physicians are already incurring extra costs that (Medicaid) is not paying for," Gibson said, citing in-office asthma treatments as an example. "I am afraid that a lot of providers are going to drop out of the Medicaid program."
It's already difficult to find some specialists, such as dermatologists, who will treat children on Medicaid, he said.
"They don't get a whole lot of reimbursement for their services," Gibson said.
Gov. Steve Beshear has called a special legislative session for Monday to address a hole in the $6.5 billion Medicaid budget. The session was called after legislators could not reach an agreement on the issue earlier this week before ending their annual session, which is limited to 30 work days in odd years.
The Democratic governor has proposed moving $166.5 million from next year's Medicaid budget to the current fiscal year, which ends June 30. Beshear has said his administration can generate enough savings in the second year to cover the transfer by starting managed care plans in Medicaid.
The Democratic-led House approved Beshear's proposal, but Republican leaders in the Senate balked, saying they don't believe Beshear can generate enough savings next year in the ballooning Medicaid program.
Instead, the Senate passed a budget fix that included cuts across state government. Education spending would be spared in the current fiscal year but would be cut in the second year of the budget, which begins July 1.
After two days of negotiations this week, the two sides could not come to an agreement. And they have no plans to resume negotiations before the legislature convenes on Monday at a cost of $68,000 a day to taxpayers.
Without a fix, Beshear has said his only option is to cut Medicaid reimbursement rates beginning April 1. Because of restrictions tied to federal stimulus dollars being used in the Medicaid program, Beshear can't cut the number of people eligible for Medicaid.
More than 800,000 people, many of whom are children, now depend on Medicaid to pay for their health care in Kentucky.
The governing board of Norton Healthcare, a Louisville-based hospital system that includes Kosair Children's Hospital, passed a resolution at a meeting on Thursday urging the state legislature to find a solution before cuts take effect.
"Such a drastic reduction would be devastating to providers, as the current Medicaid payments don't cover the costs incurred by most providers in serving Medicaid beneficiaries," said the letter, signed by Donald H. Robinson, chairman of the board, and Stephen Williams, president and CEO of Norton Healthcare.
Norton — which includes five hospitals — receives nearly $200 million a year from Medicaid. A 30 percent cut would equate "to nearly $60 million and would be disastrous, inevitably resulting in reduction or elimination of important medical services to the already medically fragile, reductions in workforce and other actions which would negatively affect our community and Commonwealth," the letter said.
Mike Rust, president of the Kentucky Hospital Association, said internal calculations suggest the state's hospitals would lose $125 million. How that would affect individual hospitals depends on how many Medicaid patients each hospital serves. Those with a higher Medicaid population, such as Norton, would have a much more difficult time managing the loss in cash, Rust said.
Hospital officials say state payments only cover about 85 percent of a hospital's cost to serve Medicaid patients. If cuts go through, that means the state is paying only about half of the cost of those services, they say.
"It would certainly have a significant impact on our hospitals in Kentucky," Rust said. "We just hope that they can come to a resolution."