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Hospitals say patients will feel impact of budget cuts, ND would lose $61 million in federal funds; DHS director says agency was ‘very aware’ of implications

BISMARCK - Recently announced budget cuts in North Dakota have the state's biggest health care providers saying patient care will suffer and has one lawmaker questioning a state agency's decision-making.

BISMARCK – Recently announced budget cuts in North Dakota have the state’s biggest health care providers saying patient care will suffer and has one lawmaker questioning a state agency’s decision-making.

The North Dakota Department of Human Services was forced to slash $54 million from its general fund budget which could mean the loss of an additional $61 million in federal funds, lawmakers learned this week.

Gov. Jack Dalrymple ordered the 4.05 percent budget cut for DHS and most other state agencies after an updated revenue forecast released last month projected a $1.07 billion shortfall compared with the forecast lawmakers used last spring to set the 2015-17 budget.

When Executive Director Maggie Anderson first explained the DHS cuts on Feb. 18, she had no estimate of how much the state would lose in federal matching dollars and other funds.

She presented that estimate Thursday to the Legislature’s Budget Section: nearly $61.3 million.

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The bulk of that amount, $41.9 million, will come from federal matching dollars in Medicaid reimbursements for health care providers.

In a letter Thursday to Anderson, the Health Policy Consortium -- Sanford Health in Bismarck and Fargo, Altru Health in Grand Forks and Trinity Health in Minot -- raised concerns about the reimbursement decreases.

“It is HPC’s view that the proposed cuts cannot simply be absorbed by providers without a noticeable impact on health care infrastructure, workforce, and patient access to the highest quality care,” the letter stated.

Sen. Tim Mathern, D-Fargo, who had requested an estimate shortly after the cuts were announced, questioned whether DHS officials took those impacts into account and tried to maximize the federal dollars coming into the state.

“By my not getting the data, it appeared to me that you were not using the data to make your decisions,” he said.

Anderson said DHS officials weren’t totaling the federal dollars as they figured out where to cut the general fund budget, but they knew which dollars had federal money tied to them.

“We were very aware of all the implications,” she said.

The department identified about $6.3 million in increased revenues, so the actual general fund budget cuts totaled about $47.7 million, with less money for everything from child care assistance to nursing homes to a new voucher program for substance abuse treatment services.

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In the biggest general fund cuts, $13.6 million came from changes to the fee schedules used to reimburse doctors and other providers serving low-income and disabled people who are eligible for Medicaid and Medicaid expansion. Those cuts will result in the estimated $41.9 million loss in matching federal funds, for a total reduction of $55.5 million to Medicaid.

Paul Richard, president of Sanford Medical Center in Fargo, said it’s planning its budget for fiscal year 2017 and has some preliminary estimates of the Medicaid reimbursement cuts, but he declined to share them because they might change.

Richard said Sanford officials are in regular contact with DHS, hoping for some changes in how the cuts were made because of concerns about the reductions to Medicaid expansion.

“We certainly don’t want to see a retrenchment from that, because there has been a profound and positive impact,” he said.

North Dakota is one of more than two dozen states that chose to pursue Medicaid expansion under the Affordable Care Act, making coverage available to eligible residents with incomes up to 138 percent of the federal poverty level. For 2015, that was $16,243 for an individual or $33,465 for a four-person household.

The state originally estimated an additional 20,500 to 32,000 residents would become eligible, and Anderson said enrollment is right around the lower figure.

The federal government is covering the cost of Medicaid expansion through 2016 for North Dakota. The state will begin paying 5 percent of the cost starting Jan. 1, 2017, a share that will gradually increase to 10 percent by 2020.

When the state begins paying for Medicaid expansion on Jan. 1, the fee schedule used by Sanford Health Plan for the Medicaid expansion population will be more closely aligned with the Medicaid fee schedule than Sanford Health Plan’s commercial fee schedule, Anderson said, noting North Dakota is the only state using such a schedule. That will result in a reduction of $30 million -- $1.5 million in state general funds and $28.5 million in federal funds.

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Sanford Health Plan is the lone private insurer involved in Medicaid expansion in North Dakota. When asked if it will have to renegotiate its contracts with providers, Sanford Health Plan President Kirk Zimmer said it’s too soon to comment.

“We certainly would like to continue our work with Medicaid Expansion, but we need to wait and see how this moves forward,” he said in an emailed statement.

Under the DHS cuts, providers of traditional Medicaid also will see their professional fee schedule reduced from 147 percent of Medicare to 100 percent, accounting for the other $25.5 million of the $55.5 million reduction, Anderson said.

In one example of figuring out where to make cuts, Anderson said DHS had to consider whether to adjust the fee schedule for Medicaid expansion or look at further cutting services to the traditional Medicaid population, such as eliminating optional services like dental, vision and physical and occupational therapy.

“So I can guarantee you that we did discuss and we considered the federal funding sources,” she said. “But when we have a $3.6 billion budget in the Department of Human Services and $1.3 billion general (fund budget), it’s hard to make a reduction to the general fund without impacting the federal dollars.”

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