Iowa's Rural Hospitals are Especially Vulnerable to Healthcare Bill's Medicaid Cuts

Jun 26, 2017

The U.S. Senate is preparing to vote on its plan to repeal and replace parts of the Affordable Care Act, also known as Obamacare. The bill would cut funding for Medicaid, the program that provides health insurance for children, middle-income people in nursing homes, poor people, and people with disabilities.

Medicaid cuts would make things harder for Iowa’s rural hospitals and could jeopardize access to healthcare for rural residents.

  

Matt Ives is administrator and CFO at Keokuk County Health Center.
Credit Katarina Sostaric / IPR

"Given that Medicaid accounts for close to one-fifth of our revenue, it would be a significant detriment to us," says Matt Ives, administrator and CFO at Keokuk County Health Center.

The hospital and clinic serves a rural southeast Iowa county of about 10,000 people.

"Our county, just because of the nature of how it is we have probably 18 percent of the population is Medicaid," Ives says.

Small, rural hospitals like this one tend to serve populations that are poorer, sicker and older—and they operate on very thin financial margins. So any cuts to Medicaid will have a more pronounced impact at rural hospitals than at large, urban ones.

The Senate’s proposal to repeal and replace the Affordable Care Act includes two major changes to Medicaid.

The first would roll back funding for the Medicaid expansion, which extended coverage to 150,000 Iowans. The second would cap federal spending on Medicaid, which covers a total of 600,000 people in Iowa.

Keith Mueller, interim dean at the University of Iowa’s College of Public Health, says that means the federal government likely won’t keep up with the increasing costs of healthcare.

"If that were to happen, the concern on the part of providers including small rural hospitals is that the payment to them would be reduced to stay within whatever that per capita rate is set to be each year," Mueller says.

Keokuk County Health Center in Sigourney.
Credit Katarina Sostaric / IPR

Estimates based on the U.S. House version of the healthcare bill predict Iowa would see a drop in federal Medicaid funding between $340 million and $780 million over the next five years. The Senate version proposes deeper Medicaid cuts on a different timeline.

It’s unlikely that Iowa could make up that difference. The state is already dealing with a budget shortfall. So Iowans will either lose insurance coverage, or healthcare providers will take major pay cuts.

Either way, it will threaten the improvements rural hospitals saw to their bottom lines after Medicaid was expanded in Iowa.

Mueller says Iowa’s rural hospitals saw their uncompensated care cut nearly in half in the first year of Medicaid expansion. In states that didn’t expand Medicaid, more rural hospitals have closed than in states that took the expansion money.

Iowa Hospital Association President and CEO Kirk Norris says good health insurance is better for patients and hospitals.

"A lot of people act as though there’s no cost to folks when they’re not insured. The fact of the matter is, there’s no free lunch in health care," Norris says. "Folks access care when they need it."

Henry County Health Center in Mount Pleasant.
Credit Katarina Sostaric / IPR

Norris says when patients are not insured, hospitals must find a way to pay for their emergency care. At Iowa’s county-owned hospitals, that cost can shift to local taxpayers.

Robb Gardner is CEO at Henry County Health Center in Mount Pleasant. He says four years ago, 10.4 percent of patients were insured through Medicaid. Now, it’s 18.2 percent.

"One of the things we’ve seen in our community, more and more people are—with their income levels, with what they’re having to do for work—they are more reliant upon Medicaid to access care for their healthcare services," he says.

Gardner says Medicaid cuts would damage the small hospital’s finances, especially if the percentage of patients who are on Medicaid continues to climb.

"Our organization, our trustees will have to look at services we’ve provided for 96, 97 years, and do we continue to provide those? We’ll have to get smaller because the payment for some of those services just won’t be there," Gardner says.

Iowa’s hospitals are already seeing thinner margins since the state privatized Medicaid. Gardner says that coupled with the threat of federal Medicaid cuts is “very scary” for a rural hospital.