Crisis in Health Care Hits Home: Aging Boomers may Find Limited Medical Resources Due to Cuts in Medicare & Medicaid

March 26, 2003

While the nation‘s attention is focused on the war in Iraq, a quieter crisis is taking shape close to home: major cuts in Medicare and Medicaid which will affect millions of aging baby boomers as well as the poor.
Officials at Munson Healthcare in Traverse City predict grave consequences for 77 million baby boomers who may reach retirement age only to find limited medical resources. Munson is presently wrestling with the loss of millions of dollars in Medicaid funds each year, with no end in sight, and the problem is shared by thousands of other hospitals across the country.
“We‘re reaching critical mass on this issue,“ says Jay Zrimec, Corporate Vice President for Public Affairs. “There are 77 million Americans headed towards the health care system in their retirement, but unfortunately, it‘s not clear to us where the compensation for their care will come from.“

THE FUNDING STREAM
In fiscal 2001, Munson had a net loss of $3,087,800 in its combined reimbursement of Medicare and Medicaid. Although the medical center gained more than $1 million in Medicare reimbursements, it lost $4,088,700 in Medicaid reimbursement for services to the poor for a net loss.
About half of all the care Munson provides is reimbursed by Medicare, Zrimec says. Although the medical center has kept its financial head above water through the past few years with Medicare, reimbursement has declined each year. In 1997, for instance, Munson provided $67 million in Medicare services and had a net gain of $4.6 in reimbursement. By contrast, in 2001, it provided $95 million in care and had a gain of $1,000,900.
If that trend continues, the medical center will be operating at a loss with both Medicare and Medicaid in the years ahead, meaning some hard choices in regard to patient services, and unpleasant news for patients.
Zrimec notes that Americans have come to expect the highest level of service from their state-of-the-art health care system, yet without the necessary funding, those expectations will be jeopardized.
“So many baby booomers are headed towards the healthcare system and they‘re all expecting that their hips and knees will work, their hearts will work, their arthritis pain will be taken care of, the swelling in their joints will be taken care of, and so many other things, so they can play golf, move to Arizona, and enjoy the retirement years. But there are tremendous costs associated with that dream that must be met.“

HARDSHIP FOR THE POOR
The situation is far graver for Medicaid services to poor families and children. Medicaid reimburses just .30 cents on the dollar. The loss is an ongoing problem for key services such as home health care.
“Every time a nurse goes out to to a home to see a Medicaid patient, we lose $25. But if we didn‘t go, the patients would end up coming to the ER and the costs would go even higher,“ notes Janet Wolf, R.N., President of Home Health Services at Munson.
Munson Home Health personnel served some 4,000 patients last year, making over 100,000 visits, Wolf says. Its staff of 100 nurses and 150 other specialists visit homes to help patients with diabetes, heart problems, lung diseases, cancer, wound recovery and a universe of other health problems.
Last year, however, Home Health Services lost $1.7 million in reimbursement, causing difficulties for the staff-driven department.
“This hits rural health care more than urban centers because 75 percent of our costs are all in staffing,“ Wolf says. “So we don‘t know how we‘re going to address all of this -- we‘re going to pray our way into the 2004 budget.“
To put a human face on those numbers, cutbacks in home care services could mean less care for a blind child recovering at home from a cornea transplant; or fewer visits to an elderly woman, suffering alone from diabetes in a mobile home at the end of a two-track far out in the country. Home care nurses see dozens of such patients each day, sometimes driving hundreds of miles on their rounds.

WHERE‘S THE MONEY?
In the past, Munson has covered its losses from Medicaid by shifting reimbursement from private health insurers, which make up 11 percent of the hospital‘s total revenues. There have also been some slight gains from Blue Cross/Blue Shield which have been helpful in offsetting the loss.
Those resources are dwindling, however. “As the cost of health care goes up, business is unwilling or unable to pay those heavy increases,“ Zrimec says.
As an example, he notes that at Bethlehem Steel and U.S. Steel, some 10,000 workers are supporting the pension/health care benefits of 98,000 retirees. “All of the big companies -- Ford, GM -- are saying they can no longer pay at these levels.“
Another revenue stream which has been hit hard is the hospital‘s investments, which have helped offset operating costs for decades. “We were doing well when the stock market was up, but now all investments are down,“ Zrimec says. He adds that philanthropic donations to the hospital are also down, again, largely due to a tough economy.
What about federal funds?
Funds spent on the war in Iraq or drained by the Bush tax cut mean less available for health care, education and other domestic needs.
“If we spend $40 to $100 billion on the war in Iraq and then stay there for 10 or 20 years, that‘s a lot of money in domestic programs which will go there instead of here,“ Zrimec says.

DODGING THE ISSUE
The costs and problems facing health care are so vast that elected officials are avoiding the issue, Zrimec adds. “In Washington, they‘re not in a position to be solving this problem in this economy,“ he notes. “And no one is addressing it.“
Wolf agrees. “They are making choices in Washington, but they‘re ignoring a problem that‘s going to implode with the uninsured,“ she says. “People are in denial. We have a vast middle class that is going to need health care.“
A long-time observer of the political scene who has frequently visited Washington D.C. on behalf of the health care industry, Wolf says she has been frustrated by the hand-off on the issue she sees from one Congress to the next. “All of the pain is put off until an elected official is out of office or until the next term. Nothing is ever settled.
“I don‘t think people realize how much this war will tie our money up for years,“ she adds.
The cost of the war and its consequences to health care provides a metaphor. The recent announcement that Detroit Receiving Hospital may close as a result of funding cuts, for instance, is the equivalent of a cruise missile attack on the city, in that patients will literally die as a result of the closing. If Detroit Receiving closes, the city will be deprived of its major trauma center as well as care for tens of thousands of patients.

WHAT TO DO?
Neither Zrimec or Wolf see universal health care or schemes such as Canada‘s single -payer health system as an answer to U.S. problems. “None of those plans work in bad economic times,“ Wolf says. “The Germans and Australians are looking at our system now because theirs isn‘t working, and a lot of Canadians are coming here for care.“
Zrimec has two recommendations for approaching America‘s health care problems.
“We need greater public awareness of the problem to demand more of our political leaders, and that requires an enlightened electorate,“ he says. “Also, before you reach the age of 65, do consider gatting long-term care insurance.“
Long-term care insurance can be locked it at lower rates during one‘s 40s or 50s. Wolf notes that she already has the insurance at a personal cost of $88 per month. “The insurance covers nursing home costs, home care, respite care and all of the things that standard Medicare doesn‘t cover,“ she says.
Taking personal responsibility for your health will be an increasing demand on Americans, especially if funding continues to dry up.
“We all choose what to drink, smoke, eat and how we exercise to stay healthy,“ Zrimec says. “There are many things we have control over on how our health is affected.“
He adds that hospitals will do their best to provide services, whatever happens.
“We understand we‘re not here to make a profit -- the mission here is to deliver health care. We just want to get the message out that we do expect that we will have uncompensated care to provide for. But like any organiztion, if you keep losing money, you can only go on for so long. Ultimately, the only choice we‘d have would be to downsize ourselves.“