New Florida Legal Services Report Examines Financial Challenges to Health Care System

By Miriam Harmatz, Florida Legal Services

My colleague, Charlotte Cassel, and I spend a lot of time explaining changes to Florida’s major supplemental payment program, the Low Income Pool (LIP) and how those changes impact individual counties. FLS Reports.

Before we started this endeavor, I pulled out notes from training by iconic poverty and health lawyer Gordon Bonnyman on Medicaid hospital financing. “It’s all about the money!” Gordon urged us to understand how the money flow between hospitals, counties, state Medicaid agencies and CMS ultimately impacts low-income state residents. He shared that his expertise got him “a seat at the table.” After the training I looked up Florida’s DSH and LIP statutes, which turned out to be a jumble of numbers, formulas and tables. At that time (pre ACA), I decided to let my math adverse brain move on to other things.

But now, in Florida and other non-expansion states, it’s more important than ever for advocates and stakeholders to take a deep breath and dive into the arcane world of Medicaid hospital financing. Because understanding changes to safety net funding in the new managed care post-ACA world can help advocates explain, in yet another way, how the state’s decision not to expand Medicaid is a grievous self-inflicted wound.

While not all of us can get invited to the table, , we can at least help the folks who are at the table– especially county leaders– understand what ‘s happening to their safety net hospitals’ budgets, how changes impact uninsured residents, and what the county could gain through expansion funding.

While Tallahassee leaders have chosen to ignore that almost a million Floridians are eligible for Medicaid expansion, and that federal Medicaid funding for safety net hospitals is being drastically cut, counties don’t have that luxury. Unlike state legislators, county leaders have to deal with local hospitals being unable to afford the cost of caring for uninsured residents. The uninsured are suffering more than ever; some are even dying as I documented in a prior CCF blog.

County leaders should understand the causes and consequences of their local disaster, and this requires a basic grasp of hospital supplemental payments. It’s too important an issue to be understood by only a tiny handful of Medicaid wonks, government officials, and industry lobbyists. Our briefs and presentations attempt to “connect the dots” so that county leaders and stakeholders can better understand how and why hospital financing is changing.

A major change concerns the critical “connecting dot” of Intergovernmental Transfers (“IGTs”).  Florida, like some  other states, has relied on a relatively small number of “wealthy” counties to fund the state match portion of safety net funding programs including LIP, DSH, and Rate Enhancements or Rate Add-Ons (RE). Counties did that through IGTs, which are payments made by a governmental entity, like a county government, submitted to the state on behalf of specific local hospital(s).

Until recently, there was a tremendous incentive for counties with access to local funding to send in as much as possible. We heard IGTs referred to as “legal money laundering.”   For example, Miami-Dade County sends $1 million to Tallahassee on behalf of the public hospital.   Tallahassee, can use that $1 million to draw down $1.4 million in federal dollars (Florida has a 60/40 FMAP), and would now have $2.4 million. Tallahassee can then send Miami-Dade County $1.5 million (the enhancement among varied depending on the state’s multiple LIP programs and went as high as 147% rate of return). That leaves $ 900,000 for the state Medicaid agency to dole out.

Not surprisingly, the old IGT program had a lot of fans who really did not want to give it up. The counties loved it (especially wealthier counties with a generous local tax base); the hospitals loved it (few if any strings attached; no monitoring); and the state Legislature loved it (no need to spend general revenue). On the other hand, CMS did not love it (articulating principles in 2015 that coverage is a better use of public money than supplemental payments; and provider payments need to be sufficient statewide).

Thus, with managed care, the ACA, and CMS principles, the role of IGTs has fundamentally changed. First, IGTs are no longer used for RE at all.   We explain why this change, which happened last year, is the only logical county response under managed care. The major change this year is that the state can no longer guarantee a return of LIP funds for IGTs. The IGT decisions that counties like Hillsborough (the subject of our last brief) are now grappling with are complicated and fraught with unknowns.

County leaders have a fiduciary duty to at least bring back to county hospital(s) the amount of the IGT submitted, but that is no longer guaranteed. No doubt there are current conversations going on behind closed doors with county and hospital and state officials. They need to cobble together the state match, and we are already well into the state’s fiscal year. From our perspective, this is akin to watching a poker game. We don’t know all the cards that counties and hospitals have and plan to play, and maybe they are waiting to see what the other counties do first.

At the end of the day, county leaders have critical decisions about local health care issues that go way beyond whether to pony up the requested IGT. We predict some amount of LIP and DSH will survive. But the amount will likely remain much reduced and these programs have a limited shelf life in the new world of designing system reform and addressing social determinants of health. Rather than focusing on supplemental payment programs and continuing to lobby CMS for a bigger LIP, a better use of local resources, including the political capital of local leaders and stakeholders, is re-engaging local legislative delegations on expansion funding.

It was inspiring to learn more about Hillsborough County. In contrast to Miami-Dade, the only other large Florida County that implemented a sales tax for indigent care, Hillsborough created a plan that actually provides coverage for low-income residents, with a focus on preventive care and provider choice. Lawrence Brown praised county leaders as: “unwilling simply to channel more money to safety-net providers, its creators fearlessly uttered the “t[ax]” word, launched a redistributive exercise on behalf of a unorganized and largely apolitical constituency; and designed a distinct, dedicated and supposedly secure funding mechanism . . .to sustain the new coverage they invested.”

Imagine what Hillsborough could do with its local tax dollars if the Florida Legislature accepted federal funding for coverage of uninsured. Imagine some local dollars being newly available to strategically spend on other things—in addition to coverage—that people need for healthier lives, e.g. more affordable housing, more public vegetable gardens? And not if, but when, Florida expands Medicaid, imagine what will happen in counties where the leaders are committed to improving health outcomes.