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Health Law Repeal Could Hit County Budgets Hard

Feb 14, 2017

Much of the focus on the potential repeal of the Affordable Care Act has been on the newly insured people who stand to lose their coverage. But there could be consequences that reach far beyond just people’s health care and impact nearly every taxpayer in the Central Valley. Repealing the law without a replacement has some county lawmakers worried.

Republicans in Washington D.C. are busy figuring out their way forward on repealing and replacing the Affordable Care Act.

Much of the reporting focus has been on what will happen to the thousands of valley residents who have found new insurance coverage either through Covered California or, more importantly, Medicaid expansion.

However, behind the scenes a big transformation has been underway at local hospitals and county governments as they have adjusted to a new health insurance reality that has saved millions of dollars on the local level.

With the potential for that to change local leaders are taking a closer look at the fiscal impact repeal could have on their budgets.

“I am trying not to hit the panic button. But it is hard not to when you think about the impact fiscally to the county’s bottom line,” says Kern County Supervisor Leticia Perez.

Her district is home to Kern Medical, which is run by the Kern County Hospital Authority.

For years, the hospital was losing tens of millions of dollars a year draining county resources away from other services.

However, after the ACA’s coverage expansion, which slashed the uninsured rate dramatically, and with some structural changes to how the hospital operates, it is now in the black.

Perez fears that repeal could deeply upset the current financial picture costing the county as much as $50 million a year to keep its doors open.

“It is shocking. Because of what we have been through and trying to survive and save this hospital that a new administration could, for whatever reason, change all that is absolutely terrifying,” Perez says.

Repealing without replacement is doubly scary to Perez because the county has been hammered by poor tax receipts due to the downturn in oil prices, and she says they “just don’t have” the cash.

Kern Medical declined to comment for this story.

Other counties could face hard budget choices too.

Prior to the Affordable Care Act, state courts ruled that counties must be the health care provider of last resort for their poorest residents.

Unlike Kern County, Fresno didn’t run its own hospital. However, they had an arraignment with Community Regional Medical Center to provide care for roughly 19,000 residents through a program called the Medically Indigent Services Program, or MISP. That contract was for about $20 million a year.

Fresno County public Health director Dave Pomaville says under the ACA, the county was permitted to roll those people into the Medi-Cal expansion removing that expense from county budget sheets.

“The important part of that is that includes primary care, preventative care, as well as hospitalization emergency visits and so forth. It’s much more manageable and a much more proactive approach,” Pomaville says.

However if the ACA is repealed, the mandate counties provide this care will remain. So counties would again have to pick up that cost. Pomaville says the old $20 million a year contract with Community is gone and it’s unlikely the price would not be as low the second time around

“In fact in 2013, we did some studies to analyze what the actual cost would be if we had to go provide services outside of the contract. We expect that those cost would have been $85-to-$90-million dollars annually,” Pomaville says.

And it’s not just the cost that would hit the county, Pomaville says millions of dollars in state support that had flown to the county for MISP has ended or been redirected. Meaning, the county would be hit with a fiscal double whammy.

Industry watchers also point out it would be very difficult for hospitals and counties to simply flip a switch and go back to 2009.

Jan Emerson-Shay with the California Hospital Association says that is because over the years hospitals have fundamentally altered their financial models to adjust for more people having insurance and having less uncompensated care on their books.

“One of the big components for us is hospitals, in particular if you were a larger hospital you took a larger cut, hospitals took a significant cut in payments to pay for the expanded coverage that came with the ACA,” Emerson-Shay says.

Emerson-Shay says the hospitals would want to see that funding restored if the law is repealed. That might be a tough sell to a Republican congress and president.

However, she is also quick to point out that there is no clear replacement plan on the table making this kind of prediction game difficult especially with the remarkable and unexpected speed of change in Washington.

However, President Donald Trump was quoted in the press saying a fully formed replacement plan could take as much as a year to prepare.