Feds eye cut to TN hospital funding; Haslam laments ‘heavy-handed’ tactic

The federal government is reviewing the funding provided to subsidize hospital care for low-income people in Tennessee and some other states that have not approved Medicaid expansion. Gov. Bill Haslam says that seems like a threat — the implication being funding should be curtailed with Medicaid expansion, has the governor proposed with the Insure Tennessee plan defeated in the Legislature.

“The way they’re approaching this feels awfully heavy handed: OK, well if you don’t do that, then we’re going to restrict the pool of money that we give you for indigent care,” Haslam told reporters Thursday.

Federal officials recently reached out to several states about reducing the amount of federal money that goes toward uncompensated care, or care provided to uninsured people who can’t pay for it. The officials also contacted Arizona, California, Florida, Hawaii, Kansas, Massachusetts, New Mexico and Texas. Florida, Kansas, Texas and Tennessee have not expanded Medicaid.

Ben Wakana, spokesman for the U.S. Department of Health and Human Services, told The Tennessean that a state’s decision on Medicaid expansion will be one factor the agency considers in the review.

In theory, a state that expanded Medicaid would need less federal money to cover people who don’t have insurance because more people would be covered.

Haslam tried to implement Insure Tennessee, a health insurance expansion program that uses federal Medicaid funding. But the General Assembly rejected the plan twice, and the prospect of it passing in future sessions is still unknown.

Tennessee receives half a billion dollars in federal funds every year to help hospitals with uncompensated care, with several state sources adding another $250 million.

In Tennessee, many hospitals pay a voluntary tax to also help cover the costs of uncompensated care. That money is in addition to the $750 million that comes from federal and local sources.

If the federal funding is allowed to end, the assessment will end as well, leaving hospitals with a large hole in funding charity care, said Craig Becker, president of the Tennessee Hospital Association.

That still doesn’t cover all the uncompensated care costs in the state. Tennessee hospitals provided $2 billion in charity care in 2013.

The talks with the federal government are in the early stages, and it’s preliminary to predict whether funding will be reduced. Funding for uncompensated care would be part of the state’s negotiations with the federal government to extend its TennCare agreement, said Sarah Tanksley, spokeswoman for the state Health Care Finance and Administration agency.