How Higher Ed Would Feel Medicaid Cuts

When states began opting in to Medicaid expansion after the passage of the Affordable Care Act, among the beneficiaries were the teaching hospitals that train doctors and nurses and serve a disproportionate share of low-income patients.

But if the U.S. Senate’s proposal to replace the ACA goes through, higher education groups say, those teaching institutions could take a large hit to their bottom lines because of serious Medicaid cuts. In addition, the pressures those reductions would put on state budgets likely will lead to less support of public higher education, the groups warned.

The Senate health-care bill, dubbed the Better Care Reconciliation Act, eventually would pare back the federal funding that made Medicaid expansion possible in many states. For teaching hospitals in those states, the expansion meant fewer uninsured patients and a lower budgetary burden for providing uncompensated care. Even in states that didn’t expand Medicaid in recent years, the Senate proposal would mean serious reductions to the program by awarding states funding through block grants instead of a set per-patient amount.

Karen Fisher, chief public policy officer at the Association of American Medical Colleges, said the Medicaid cuts would “absolutely” be bad news for teaching hospitals.

“If you have more uncompensated care, that puts more fiscal pressure on your ability to support your other missions,” Fisher said.

That could mean research activities at some institutions feel the squeeze, she said. AAMC hasn’t made projections for the budget impact of the proposed Medicaid cuts for its member institutions. But Fisher said the benefits of Medicaid expansion were clear.

“There’s been less uncompensated care. More people have had coverage through Medicaid,” she said. “It’s been helpful for the bottom line. It’s produced healthier patients who are using the emergency department less.”

The 30 states that expanded Medicaid by March of last year enrolled more than 14.4 million new individuals in the program, including 11.1 million who were made newly eligible under the expansion, according to data from the Kaiser Family Foundation.

Thomas Schwenk, dean of the University of Nevada, Reno School of Medicine, said that after many states expanded Medicaid, teaching hospitals that serve as safety-net institutions found themselves on more sound financial footing. That’s what happened at the University Medical Center in Las Vegas, which is back in the black after running losses for several years before Medicaid expansion. More than 200,000 newly eligible Nevada residents enrolled in Medicaid after expansion in 2014.

With fewer uninsured patients, those hospitals can invest more in subspecialties of medicine -- like immunology or cardiology in internal medicine -- for which they weren’t able to offer training before, Schwenk said.

“The whole point of an integrated academic health system is to have high-quality, reasonably compensated clinical care and for some of that revenue to then support research and teaching activities for which there is no other source of support,” he said.

And Schwenk said with the National Institutes of Health budget either cut or failing to keep pace with inflation in recent years, the proposed Medicaid cuts add up to threats from multiple sides of the budget for academic medical institutions.

In a letter to congressional leaders that was sent days after the health-care plan’s release, a group of 19 higher ed groups, including the AAMC and the American Council on Education, wrote that the increase in uncompensated care costs for teaching institutions would make it more challenging to invest in research and training. Medicaid cuts and changes to the individual insurance marketplaces in the Senate bill also would make insurance inaccessible for many low-income college students, the groups wrote.

Pat Gentile, president of Northshore Community College, which is located in Danvers, Mass., said college students in the state are required to have health insurance if they enroll in courses that are worth at least nine credit hours. In recent years, Northshore has seen fewer and fewer students purchase health insurance through the college, as many more have become eligible for Medicaid. If Medicaid expansion is rolled back, however, many low-income students may have to use financial aid to purchase coverage through the college. Those students could also drop below the nine-credit threshold, Gentile said, or choose not to attend college at all.

“We know that when students perceive that the price is too high, they walk away,” she said. “That’s my biggest concern about cuts to Medicaid.”

‘Domino Effects’

Higher education groups also told lawmakers the proposal would have adverse consequences for overall state budget contributions.

“This would exacerbate the long-term decline in state support for higher education and inevitably lead to increased tuition and potentially cuts to state student financial aid programs, raising the cost of attending college for students and their families,” Terry Hartle, ACE's senior vice president for government and public affairs, said in the letter. “History has shown that when states need to make cuts, state support for higher education is often a first target because of the ability to shift costs to students and families without raising taxes.”

David Socolow, director of the Center for Postsecondary and Economic Success at the Center for Law and Social Policy, co-authored a policy brief after the passage of the American Health Care Act by the U.S. House of Representatives arguing that recent precedent illustrated just that claim. The last time state lawmakers faced serious budgetary challenges, public support of higher education saw some of the largest reductions, he said.

State support of higher education on average was reduced by 28 percent from 2008 to 2012, according to the center.

In Pennsylvania, state higher ed spending was $795 less per student four years after the 2008 recession. In Arizona, that post-recession shortfall was $902, and in California it was $3,835.

“State funding of postsecondary institutions has barely recovered from the hit it took in the aftermath of the recession,” Socolow said.

He said the proposed Medicaid cuts in the Senate health-care plan would be equivalent to another recession in their impact on state budgets. And the reduction in federal support for the program would mean state lawmakers would be faced with a dilemma of letting residents go uninsured or making cuts elsewhere. Recent precedent shows that higher ed often is where the budget is balanced, he said -- possibly because state universities can offset cuts with tuition cuts and pass on the higher costs to students.

“All of these are the sort of domino effects of slashing Medicaid at the levels that are being proposed here,” Socolow said.