Horizon, Host: Ted Simons

February 26, 2009

Host: Ted Simons

Health Care Cuts

  • Arizona's health care system is enduring severe budget cuts made by the state legislature. Arizona Hospital and Health Care Association President John Rivers discusses the impact of the cuts.
  • John Rivers - President, Arizona Hospital and Health Care Association
Category: Medical/Health

View Transcript
Ted Simons
>> Arizona hospitals, like so many other groups, are feeling the pain of state budget cuts. one example is a $7 million cut to a residency program for doctors. because there are two-to-one federal matching funds, the cut ballooned to $21 million. that could make Arizona’s doctor shortage even worse. here to talk about how budget cuts are affecting hospitals is John Rivers, C.E.O. of the Arizona hospital and healthcare association. John nice to have you here.

John Rivers
>> nice to be here.

Ted Simons
>> let's talk about budget cuts in particular. an overview, how are they affecting hospitals?

John Rivers
>> predominantly in three ways. first we have cuts to the disproportionate share programs. these are hospitals that take care of large numbers of low income and uninsured people. safety net hospitals. so they've been affected by budget cuts. the secondary, you talked about graduate medical education. that's how we fund our training programs for doctors in the future. those have been cut. and then the third area affects predominantly rural hospitals because access like every other state agency was given a lump sum budget reduction and taken out of the hide as they have little choice to of our rural hospitals.

Ted Simons
>> so the payment freeze regarding access, explain what that is and how much that's affecting you guys.

John Rivers
>> a payment freeze says we're not going to pay you any more for taking care of the patients you took care of last year. that was a $49 million hit in fiscal 2009 on top of another $64 million hit we took in the recently passed FY '09. so those are the global numbers even in the healthcare field, and that's real money.

Ted Simons
>> and that also includes federal matching funds correct?

John Rivers
>> yes, this is what a lot of people don't understand about our Medicaid program called access works. think of it as a 401k plan. you put a dollar into it, and your employer puts in $3. that's the way our state Medicaid program is funded. in this case, it's the federal government. The reverse is also true if you take a dollar out of the 401k program and your employer takes $3 out at the same time, it works the same way under our state's access program. the incentive is to put as much money as you can to strengthen the economy of the state, not to take as much money out as you can.

Ted Simons
>> and you have a two-to-one match on that residency program.

John Rivers
>> it's a two-to-one match under the old formula, but the increase in federal Medicaid funding has changed that to a three-to-one match. everything is three-to-one instead of two-to-one now.

Ted Simons
>> federal stimulus, what do you know about money coming into Arizona, and how will the money affect hospitals, in particular, and healthcare in general?

John Rivers
>> well how it should effect hospitals and how it will effect hospitals may not be the same thing. the global math is that there's about $4 billion in -- $4 billion, that's billion with a B -- that's coming into Arizona over roughly a two-year period. that affords the legislature a huge opportunity not to make vital cuts in essentially healthcare services that are -- that are there for the people who need them most. even though the state may be in a recession, people still need healthcare services.

Ted Simons
>> with that in mind, talk about the ramifications of these cuts and the economy as well. which is playing a major factor in all of this? it sounds to me that those of us that pay will be paying more.

John Rivers
>> there is no question that the burden shifts, we call it the hidden healthcare tax, the burden for paying for those who can't afford healthcare is shifted on the back of those who are already paying for healthcare and in most cases they are paying more than they need to. so every time the government under-pays for one of their patients, a Medicare or Medicaid or access patient, some of that cost is going to get shifted to private paid patients.

Ted Simons
>> how else are hospitals responding or planning to respond?

John Rivers
>> well, it's very difficult. we're making this case to the legislature right now. and because hospitals contrary to popular opinion are not recession proof, we tend to be resistant, but not recession proof. and that's because right now, we find that people are cutting back on -- finding volumes are down. elective surgeries are down. if it's an out of pocket expense, people are deferring it. people who show up for healthcare services don't have insurance. so we're definitely affected by the current recession, philanthropy is down. it's almost a perfect storm of economic pressure that’s on hospitals right now.

Ted Simons
>> you said you are talking to law makers right now, what are you hearing back from the legislators?

John Rivers
>> they understand this issue. it's not like they can't figure out the math. we go back to the 401k example, is pretty evident. they see it, they understand it. I think they're sympathetic to the arguments about strengthening the healthcare safety net. not shredding it. their problem is a math problem. they have an awful problem they're trying to solve and they're sensitive and understand the issues we've raised. they want to help and it remains to be seen if they can find the financial resources to do it.

Red Simons
>> are they more sensitive now than they might have been before the '09 budget was submitted?

John Rivers
>> I think they understand it better now. the fy '09 budget was put together in a hurry. we understand the time pressure that it caused them to pass it quickly in the first place. I don't know if I’d say they're more sensitive to it, but they understand the problem a lot better now than they did three or four weeks ago.

Ted Simons
>> thanks for joining us. we appreciate it.

John Rivers
>> you're welcome.

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