SF General will lose much of its federal subsidy under Obamacare

Pub date November 19, 2013
WriterReed Nelson
SectionPolitics Blog

As President Obama’s Affordable Care Act is phased in over the next couple years, San Francisco General Hospital will lose at least 25 percent of the $123 million it receives from the federal government to offset costs of caring for the uninsured, but hopefully that will be offset by its expansion of those who will have health insurance.

General Hospital receives those funds for being a so-called “safety-net hospital,” a place where those without insurance can still get quality healthcare. Even though the need for such safety nets is supposed to diminish under Obamacare, SF General will remain a critically important safety-net hospital.

Many San Franciscans – including non-U.S. citizens who won’t qualify for coverage under the Affordable Care Act, as well as homeless individuals – will continue to rely on the hospital when in need of medical care.

Yet here and nationwide, concern is brewing about whether funding for safety-net hospitals could be impacted if enrollment in the new state health exchanges doesn’t reach anticipated levels.

“The financial question every state is asking is: What are the newly eligible patients going to do? What plan will they enroll in? Will they enroll?” Greg Wagner, CFO of the San Francisco Department of Public Health, told the Guardian, referring to the health insurance marketplaces created under the Affordable Care Act.

Most safety-net hospitals in the country are bolstered with federal subsidies, and are especially reliant on funds known as disproportionate share hospital payments, or DSH. However, those subsidies are about to be slashed with machete-like strokes.

All told, as much as $18 billion nationwide could be siphoned away from safety-net hospitals by 2020. Compounding that is another $22 billion that could be cut from Medicare subsidies, depending on the number of insured.

There’s an expectation that the looming safety-net budget cut will be offset by the burgeoning population of insured residents who would flock to state health exchanges. It makes sense: Instead of absorbing the entire cost of an uninsured patient, hospitals would be getting money from newly active insurance policies, and no money would be lost.

The New York Times recently ran a story detailing how low-income patients in Georgia may be put in a precarious position under federal healthcare reform because safety-net hospitals in Georgia might not be able to make up for lost funding once DSH payments evaporate.

California isn’t likely to experience this problem to the same degree, Wagner said, because the state chose to expand Medi-Cal, the state version of Medicaid, to include all low-income residents and not just those who previously qualified under a narrow set of criteria. Georgia had the same option to expand, but chose to keep its Medicaid qualifications in place, like many states led by Republicans looking to tweak President Obama.

As things stand, enrollment in Covered California – the state’s health insurance marketplace under the Affordable Care Act – remains low. Until enrollment closes at the end of March, it’s an open question whether it will reach the necessary levels to make up for pending cutbacks.

So far, 59,000 Californians had completed applications and enrolled in health insurance plans within the new marketplace as of Nov. 13. That’s a drop in the bucket, considering that 2.3 million are eventually expected to enroll. According to state data, 203,904 applications had been started online (reflecting an estimated 370,000 individuals). In addition to those applying for Covered California plans, another 72,000 people were determined eligible for Medi-Cal. 

“SF General operates on a huge amount of federal money,” Wagner explained. “Some comes directly from the federal government, and some comes from DSH.” He said the hospital received $123 million in DSH funds last year, “and not all of that will go away” once cuts go into effect.

“Healthy SF will still be around after March 31,” said Wagner. “We’re still retaining the program for anybody not eligible for Medi-Cal, and through Healthy SF those people can still access primary healthcare.”
He even said that under extreme circumstances, like the delivery of a child, for instance, some undocumented immigrants will have the opportunity to enroll in Medi-Cal. 
And it’s not all gloom-and-doom on the subsidy front, either. There is a safety-valve for the safety-net hospitals: If everyone who is expected to enroll in Covered California actually does so, the funding will be available without the need to rely on federal aid. 
But in order to achieve that idyllic plateau, a serious push is needed on the enrollment level. Granted, those enrollment figures should rise. But what if they don’t? 
“If people don’t enroll in the new programs, it will be a big problem,” said Wagner. “If we have a significantly lower enrollment number than we initially predicted, we will have some major financial issues. There’s still some uncertainty.”

He added, “We’ll still provide care for the uninsured at SF General. The money will decrease, but it won’t disappear. By no means will all of the money go away. The hope is that the newly enrolled will offset the decreasing number of uninsured, then the federal government could take the DSH payment and redirect it to the providers.” 

That being said, “we still have lots of optimism moving forward,” Wagner said. “We think people will enroll.”

[Correction: We corrected the amount of the reduction from 50 percent down to 25 percent].