Advocates Call For Revamp of Medicaid Funding Distribution System

A group of campaigners and lawmakers have come together to demand a fix to what they describe as broken Medicaid assessment funding formulas so that Illinois can more equitably provide money for low income hospital patients.

State Rep. Chris Welch (D-Hillside) and state Sen. Omar Aquino (D-Chicago) have proposed legislation to change the Medicaid hospital assessment program, which is meant to address inequalities in the distribution of Medicaid funding.

“Despite a distance of just nine miles, residents of two Chicago neighborhoods – Englewood and Streeterville – experience a 30-year difference in life expectancy. The African-American community has been denied equitable resources for healthcare. As representatives of the community, we cannot stand by and let this inequity persist. We demand fair funding now,” Welch said.

Wellington Thomas, an ER tech at Loretto Hospital, lamented that community hospitals were closing because they do not have funding.

“We want to stop the suffering in our neighborhoods and in the hospitals where we work — the suffering caused by unfair funding. Community hospitals are closing because they don’t have the funding they need. I can tell you that the difference between a four-minute ride to a hospital and an eight-minute ride can be the difference between life and death,” Thomas said.

What the bill proposes

Among other issues, Senate Bill 3010 calls for increased capitation payments to managed care organizations, the extension of certain assessments to July 1, 2022, rather than July 1, 2020, and reimbursements for inpatient general acute care services to non-publicly owned safety net hospitals, non-publicly owned critical access hospitals, hospital providers in high-need communities, and other facilities. The bill also says funds must be allocated from the transitional access hospital pool and also sets administrative rules for data collection and payment from the health disparities pay-for-collection pool.

NPR Illinois reported that the Medicaid hospital assessment program sets aside an estimated $3.6 billion to help reimburse hospitals that care for patients who cannot afford expensive hospital stays and those without medical insurance. Critics of the current system say the funding should be distributed evenly among providers throughout the state annually based on a number of criteria, but they say this has not been happening.

Saving community hospitals from closing down

Due to the lack of the equitable distribution of Medicaid funding, in areas where low-income populations are higher than average, such as Chicago and East St. Louis, hospitals have been forced to either limit services, or entirely shut down, it was reported.

The proposed legislation would make a $1 billion investment in payments specifically to hospitals dependent on Medicaid, private hospitals in high-need communities, and rural critical access hospitals.

A statement explained that should the bill pass, it will establish a changed Fair Provider Tax, reversing the current problem of small and community hospitals being taxed at a higher rate than wealthy, high volume medical facilities, call for a Larger and More Effective Transformation Fund allowing hospitals serving high-need populations to better serve their communities, provide for Well-Targeted Payments to ensure funding goes where it is most needed and allow for Transitioning of Supplemental Payments when Federal regulations phase out payments to reduce impact on smaller community hospitals.

The proposed legislation details a funding plan through fiscal year 2024.

“Currently the laws in Illinois benefit the big and rich hospitals at the expense of the community and safety net hospitals. It’s the safety net hospitals that provide care to those most in need but get the least support,” Kathrine Jones of South Austin Community Coalition, who described the current system as offensive, said.

This was a view echoed by Kim Smith, a patient care tech at Northwestern Memorial Hospital, who said: “But sadly, Northwestern doesn’t always seem to put patients’ care first, saving the money it gets from property tax exemptions for managements’ paychecks instead of putting it back in community care. I know this isn’t how we should treat the patients who come to us in times of need, and that’s why we’re calling on the state legislature to adopt this new bill as soon as possible.”

Critical access and safety-net hospitals have been in the spotlight for a while in terms of lack of funding. In 2019, Governor J.B. Pritzker signed into law a bill that changes some tax laws in order to provide $55 million in funding for more than 50 critical access hospitals across the state. The new legislation, which required managed care organizations to make expedited payments to critical access and safety net hospitals was also mooted.