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Snyder’s planned hospital funding cuts split lawmakers

Gary Heinlein
The Detroit News

Lansing — The Senate and House disagree on funding cuts proposed by Gov. Rick Snyder that hospital officials and doctors say would put physician training programs and important rural health services in jeopardy next year.

Snyder’s proposed 2016 budget increases a hospital tax by $85.2 million to take the place of state funding for physician residency training and for specialized services that rural hospitals otherwise couldn’t afford. And it ends an $11 million subsidy for rural obstetrics and gynecology programs.

A change he seeks in hospitals’ reimbursement rates would cut their combination of state and federal funding an additional $34.8 million. The three proposals would result in an overall reduction of $131 million in 2016, according to Steve Angelotti, Senate Fiscal Agency associate director.

Snyder said hospitals can afford it as they gain revenue from his “Healthy Michigan” expanded state Medicaid plan. He expects to enroll 580,000 Michiganians by sometime in 2016 — 180,000 above original projections — who will be covered through the state-federal health program.

But his proposals are being described as unacceptable by officials of the organization that represents and lobbies for the hospital industry in Lansing.

“(T)he only relief offered to restore these programs is to increase hospital provider taxes by approximately $100 million,” Michigan Health and Hospital Association officials said in a February report to members.

Association public affairs director Laura Wotruba said in addition to doctor training, the funding under dispute supports “access to hospital services, such as primary care, emergency services and other outpatient services such as dialysis, outpatient surgery, labs and imaging services.”

The Health and Hospital Association says 36 of Michigan’s 83 counties lack hospital OB/GYN services. Distance to childbirth care for pregnant women remains a “serious issue,” in rural areas, especially the Upper Peninsula and northern Lower Peninsula, Wotruba said.

Altogether, Snyder proposes spending $19 billion on community health as part of his $55 billion state budget for 2016. Among its other health provisions:

■$56.1 million in state general funds would be replaced by an increase in a hospital Quality Assurance Assessment tax to continue bringing the state $106.7 million in Medicaid funds for its $162.8 million graduate medical education program. That program helps pay for resident physicians on staff at 57 Michigan teaching hospitals.

■Increased Quality Assurance Assessment taxes also would replace the $12 million state share of funding for the rural hospital services program, which costs $34.8 million and includes $22.8 million from the federal government.

■An $11 million pool of money to help pay for obstetrics and gynecology services in lower-population areas would be eliminated. Of those funds, $3.8 million is state money.

The House subcommittee on health care appropriations last week agreed with Snyder’s plan for graduate medical education but voted to maintain funding for the rural health services at a reduced level of $29 million, $10 million of which would come from the state.

Rep. Rob VerHeulen, R-Walker, who heads the House health care appropriations subcommittee, said finding money for everything in the general fund — the state’s main checkbook overseen by lawmakers — “is very challenging.”

He disagreed with the hospital group’s characterization of Snyder’s strategy for graduate medical education as a cut in funding. The use of the hospital tax hike to continue drawing the same amount of federal Medicaid support would assure that it continues, he said.

Also last week, the Senate’s community health appropriations subcommittee voted to reject the governor’s plan and continue full state funding for all three of the programs.

That would be done through an “ingenious” strategy that also makes use of the Quality Assurance Assessment tax without reducing overall state funding to hospitals, said Republican Sen. Jim Marleau of Lake Orion, the subcommittee chairman.

In essence, the state would use an $85.2 million increase in the hospital tax to draw enough additional federal money to offset its costs and fully reimburse hospitals, according to the Senate Fiscal Agency’s Angelotti.

“Every year, the graduate medical education (funding plan) doesn’t look very good, and we somehow wave a magic wand and put it back in June,” Marleau said.

The Senate version isn’t the final word. however. Now the House, Senate and governor will have to settle their differences as production continues on the new budget in mid-April following the Legislature’s two-week spring break. Lawmakers hope to finalize the budget in June.

The hospital association remains leery of either plan. While it appreciates lawmakers’ efforts, Wotruba said, “we are still concerned that both the House and Senate solutions to the budget problem are largely dependent on hospital provider taxes.”

GHeinlein@detroitnews.com

(517) 371-3660