County Holds the Line While Indigent Healthcare Costs Skyrocket

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Tuesday, July 20, 2010 | The Great Recession has forced record numbers of adults to arrive in local hospital wards as indigents, but Orange County has thus far refused to increase its budget to help pay for their care, leaving private hospitals to bear the burden.

Hospital officials estimate their increased costs at about $100 million and say the county’s stance has not only strained their budgets but could ultimately contribute to higher health costs for all county residents.

The issue came to a head in June when the Board of Supervisors chose to keep its share of indigent care costs virtually the same as last year and allocate just $2 million from a special state funding bill, even though hospitals wanted $17 million and its own health department recommended adding $7.6 million.

Hospital officials testified during the hearing that the situation had become dire and that hospitals were on the brink of insolvency. They left the meeting disheartened and angry, saying that they would have to publicly fight harder than ever before for more funding.

Since, they’ve backed off.

“The payments to the hospitals now are under 25 cents to the dollar of what it costs them,” said Julie Puentes, regional vice president for the Hospital Association of Southern California. And with the patient load for fiscal 2008-09 up 72 percent from the previous year, hospitals “are trying to do more with the same amount of money.”

Supervisors don’t dispute Puentes’ assertions but say the county is too strapped itself to pay any more. Last month the county passed a $5.4 billion budget that included cuts to a vast array of programs and services, and it may be cut further depending on what the state does with its budget.

“There’s no argument,” Supervisor John Moorlach said. “We have a very fragile health system in our county. No argument our health providers are putting in a disproportionate share.”

However, when it comes to contributing to hospital care for indigent adults, the county is penurious compared with other large, urban counties in California.

Orange County pays about $76 million for indigent adult care. San Francisco, which has about one-third of the population, pays about $122 million for indigent adults. Los Angeles County has four county-run hospitals and partnerships with about 100 private clinics that care for indigent adults and other patients.

The fact that San Francisco and Los Angeles have county hospitals accounts for some of the funding disparity.

Caring for the Hardest Hit

Health care for impoverished adults, as much as any single issue, drives home the impact of the Great Recession on all areas of Orange County. When a person loses his or her job, health insurance almost always goes with it.

And since private hospitals can’t, by federal law, refuse someone emergency medical care, they are picking up more and more of the tab for caring for the uninsured. Ultimately, those who still have private medical insurance will likely help cover the shortfall through potential tax increases or higher health insurance premiums.

There are three main government programs that provide health care. Medi-Cal is a state program that provides care for poor children and families, and Medicare is a federal program for adults 65 and over.

The Medical Services Initiative (MSI) is a mandatory state- and county-financed program for adults 21 to 64. It is through this program that the county should be paying a larger share for adult indigent care.

Making matters worse for Orange County has been its comparatively low return on property taxes. County leaders are considering a lawsuit to change the formula for distributing property taxes.

State Sen. Lou Correa, D-Santa Ana, won a slight incease in the county’s property tax allocation formula that this year brought the county about an extra $50 million. But the windfall didn’t help hospitals much.

This was the pot of money out of which the hospitals wanted $17 million and the county’s health department recommended $7.6 million go toward an increase in county MSI funding.

The health department stated: “Hospitals, which were already reimbursed at very low levels, are seeing payment levels drop even further. The reductions in payment levels may affect the willingness of medical providers to see MSI patients.”

But the supervisors ultimately decided on allocating just $2 million.

Life Without a County Hospital

All hospitals, private and county, that have emergency rooms take in emergency cases. But if a county has its own hospital, those without insurance can be taken to that hospital once their medical emergency is stabilized.

Since Orange County stopped running a county hospital, private hospitals bear this burden. The largest include the following: the UC Irvine Medical Center in Orange; Anaheim Memorial; Western Medical Center in Santa Ana; Fountain Valley Regional Hospital; Mission Community Hospital in Mission Viejo; St. Jude in Fullerton; St. Joseph in Orange; and Hoag Memorial Hospital Presbyterian in Newport Beach.

Orange County had its own hospital for most of the 20th century. It began in 1914 as a tuberculosis sanitarium and the building is still standing in Orange, on the grounds of the UCI Medical Center.

The hospital expanded over the decades until the Board of Supervisors decided it wanted out of the hospital business in the mid 1970s and found a willing buyer in UCI.

Since that transaction, private hospitals have cared for those without insurance, depending on the county to reimburse costs. But in the past year alone, because of the economy, the hospital association’s Puentes estimates that local hospitals with emergency rooms have swallowed nearly $100 million in unrecovered expenses.

Help on the Way?

The health department says it is expecting federal funds, possibly as much as $40 million, to be approved later this year to help offset the costs of caring for indigent adults.

And when federal health insurance reform begins to take effect in roughly three to four years, it should lift a large part of the burden from the county for caring for indigent adults.

But depending on how the economy is progressing and how details of the health insurance plan work out, it may also mean higher taxes, Puentes noted.

In addition, the hospitals in the next few years will be negotiating new contracts with private health insurance companies and those with private insurance could see a rise in premiums to help cover the costs not picked up by the county.

Providing healthcare to those who can’t afford it is important, Puentes said.

“Who wants people to be without access to care?” she said. “We all want that.”

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