Florida could have huge squabble over reallocation of safety-net funds

Payments from the federal government to Florida's hospitals will be cut by nearly half this coming summer, prompting state officials and hospitals to try and determine how the remaining money will be reallocated, according to the Miami Herald.

Funding for the Low Income Pool (LIP) program will drop from $1.1 billion a year to about $608 million. Moreover, the Obama administration has also restricted how organizations can use the funds. After July 1, organizations can only use the money to pay for or discount care for poor and uninsured patients. The rationale of the cuts and the change in how the funding may be used is the fact that Florida is among 19 states that have yet to expand Medicaid eligibility under the Affordable Care Act (ACA). Considering the feds are subsidizing up to 90 percent of the cost of that expansion indefinitely, the argument is that expansion would supplant the need for LIP funding.

Under the old funding model, counties send tax dollars on behalf of their public hospitals to the state government. For every $40 contributed, the feds send back $60 in matching funds.

However, the changes in the LIP allocations means that the formula won't be based on tax contributions, but levels of charity care provided by hospitals versus their costs for providing that care, according to the Miami Herald. And the federal government also wants the state to revise its allotment formula, and won't release any funds until the matching funds are raised and remitted.

Given those changes, the local governments may not send in their funds at all, and instead use the money to directly pay hospitals that provide the most charity care, leaving others without payments. 

That could cost Jackson Health System, Dade County's biggest safety-net provider, as much as $23 million in annual revenue, according to the article. But Homestead Hospital, a not-for-profit system operated by Baptist Health South Florida, could see a gain of as much as $14 million.

A 2014 report concluded that the Sunshine State's refusal to expand Medicaid eligibility would cost its safety-net hospitals billions of dollars in the coming years. A report issued by Navigant Consulting last year had cast doubts on whether Florida could preserve its safety net in the wake of the LIP funding reductions.

Florida's lawmakers are still pondering funding alternatives and have yet to finalize a plan, the Miami Herald reported.

To learn more:
- read the Miami Herald article