Ted Simons: Healthcare advocates say millions of dollars in cuts to Arizona's healthcare system in the Republicans' state budget would hurt Arizona's healthcare infrastructure. Recent testimony at the legislature warned that cuts would endanger the health of Arizona's low income residents. It was also said that cutting healthcare dollars would mean more using hospital emergency rooms and higher healthcare costs for everyone. Here to talk about the impact of state budget cuts on the healthcare system in Arizona is John Rivers, president and C.E.O. of the Arizona Healthcare and Hospital Association. Good to see you again, thanks for joining us.
John Rivers: Thank you, Ted, you bet.
Ted Simons: The 2010 budget is out there. The governor hasn't received it yet, but it's out there. What are your thoughts on it?
John Rivers: Well, it depends on which version of the budget you want to talk about. The governor's budget is a much kinder budget in terms of how it treats healthcare programs than is the budget approved by the House and Senate. So right now the House and Senate version would cut healthcare in hospitals to the tune of $106 million a year, so that's going to affect a lot of safety net programs that help very vulnerable people during the economic downturn that we have right now.
Ted Simons: When you talk about cuts, explain a little how reimbursement works to hospitals on access patients.
John Rivers: Well, essentially access underpays hospitals for virtually everything that they do, and that means that the shortfall, the difference between the cost of providing care and the cost of being paid for that care by access gets shifted on to the private sector, and we had actuaries tell us that if the cuts that are in the budget right now are enacted, private health insurance premiums in Arizona are going to go up 16% next year, solely on the basis of those cuts that are in this year's proposed 2010 budget.
Ted Simons: And you call that the hidden health tax, correct?
John Rivers: Call it the hidden healthcare tax. That's exactly what it is. It's not really a cost savings. It's just shifting the cost from state government to private paying patients. That's really all it is.
Ted Simons: Talk more about the impacts to hospitals, again with cuts to access, the whole reimbursement thing and cuts to D.E.S. and other aspects of service care within the state.
John Rivers: Well, hospitals are part of a large safety net that protects many vulnerable populations in Arizona, the cuts that you alluded to earlier to C.R.S., children's rehabilitative services, cuts in vaccinations, cuts to Arizona Department of Health Services that you mentioned, are all part of safety net programs that are critical in supporting certain populations here in Arizona. And those people who don't get cared for through those safety net programs ultimately end up in hospital emergency rooms where it costs more at that take care of them than if they had been served by these programs initially.
Ted Simons: I know one lawmaker especially, Kopeniki says the budgets will hit his rural area hospitals really hard. Talk about outlying areas, rural areas, what are you seeing?
John Rivers: There are special programs set up to help rural hospitals, one of which is called the Safe Program. It's about $12 million a year and it's used to shore up the very financially fragile condition of our rural hospitals. I think there's a perception among some legislators that they have dealt with that issue in the budget, but they really haven't. There's about a $3.6 million cut in there to the access budget and when access looks to where can we find the money to make that up, they look at programs like the Safe Program, which does affect rural hospitals very directly and very dramatically. It also affects graduate medical education funding and other important programs.
Ted Simons: Let's talk about solutions here. Republicans, the leaders, they say there just simply isn't the money. What do they do? Deferring payments, one month payment for access, is talked about. Is that a good idea as far as you're concerned?
John Rivers: That’s a great idea. That would save $110 million right out of the gate simply by delaying for one month capitation payments to access health plans. But there's an even better idea on the table out there, which is use the federal stimulus money. There is $775 million in federal stimulus money for Arizona in fiscal year 2010. The legislature only needs to spend 26 million of that $775 million to avoid cutting the safety net programs that are being provided to patients and by our hospitals.
Ted Simons: The -- compare what you've seen so far, from the legislature, F.Y.10 budget with the '09 budget.
John Rivers: Let's see, the '10 budget is worse without a doubt. In the '09 fix, there was a fix to that budget that started early in the year, there were about $68 million in cuts to
healthcare that mainly affected what we call disproportionate share of the rural hospital
payments that we talked about earlier and funding for graduate medical education.
When we pointed all of that out to the legislature, they said “Oh, we didn't mean to do that.” And so they went back and essentially rescinded those cuts in the final 2009 budget. So the way things turned out in 2009 was fairly positive. But in 2010 we're seeing many of the same programs that the legislature restored in 2009 on the chopping block once again.
Ted Simons: What about inflation, medical cost inflation, how does that factor into all this?
John Rivers: Well, it's a big factor because in the budget that the senate and house have approved, they originally had assumed no medical inflation, and the final budget that they approved they did assume a level of medical inflation. But the problem is with a freeze in the rates that healthcare providers are paid, the way the 2010 budget looks is that healthcare providers including hospitals are going to be paid the same that they were paid for in 2008. Well, it costs more to provide services in 2010 than it did in 2008. There are technologies and drug treatments and therapies that are available this year that weren't available two years ago. So the legislature can deny that if they, I guess there's an element of denial there that medical inflation is something that has to be addressed in the budget, but we think there are ways to do it, the solutions we talked about are two perfect solutions to that problem.
Ted Simons: Last question, are you getting some attention from lawmakers, the same kind of attention, we talked while the '09 fix was going on, and I know that you wanted to get there and it sounded like you did, is F.Y.10, are they starting to listen?
John Rivers: I think they are, in fact, we have a number of champions in the legislature, republicans and Democrats, who understand the issues that we've talked about, a number of them are fighting very hard for this for all these issues we talked about. But there are a lot of items in this budget, and they're frankly dealing right now with some of the more global issues, how big a deficit are we talking about, are we going to have a tax increase, if so, how much and how do you do it. It's hard sometimes to get legislators to focus on these little but very important things that affect their constituencies, but you brought up a good example, Representative Kopeniki who says “Hey, my rural hospital is important in my community,” and there are quite a few legislators who are sensitive to that issue as well.
Ted Simons: John, always a pleasure, thanks for joining us.
John Rivers: You bet, Ted, thank you.