Children's hospitals — and their patients — caught in the crosshairs with planned federal cuts

Republican plans targeting federal funding for health coverage have drawn ire from Americans in all corners of the country, but some of the loudest voices are coming from parents. They have cornered members of Congress at town halls to ask how the slashed budgets will affect some of society's most vulnerable.

Suggested cuts to Medicaid and the Children’s Health Insurance Plans (CHIP) would throw millions of Americans off insurance and leave hospitals that are already teetering financially facing more uncompensated care. Children’s hospitals, safety net hospitals and rural hospitals will be most affected, and disabled children will face devastating cuts in coverage.

The funding decreases have been proposed in bills making their way through Congress and separately by President Donald Trump. They would shift the cost burden further onto states, many of which have seen success in expanding Medicaid, which is also on the chopping block.

“Children, the elderly, the disabled, and others from our most vulnerable populations would all be affected by these deep budget cuts,” Joanna Hiatt Kim, vice president of policy at the American Hospital Association, told Healthcare Dive. “For hospitals, this could mean more uncompensated care as millions continue to seek needed healthcare without any coverage. For the patient, this could mean delayed care or foregoing care altogether.”

Impact on children’s healthcare

More cuts to Medicaid and CHIP would reverse the trend of fewer uninsured Americans, including children.

Congress created CHIP 20 years ago when 15% of children were uninsured. CHIP, the Affordable Care Act and Medicaid expansion provided more insurance offerings and now only about 5% of children are uninsured. CHIP, which is a federal/state partnership, includes free well-child visits in many states and also provides prescription coverage, inpatient and outpatient care and emergency services.

While suggesting a two-year CHIP extension in his budget plan, Trump proposed a 20% CHIP cut over the next two years. His budget also seeks a $610 billion cut from Medicaid over 10 years, despite early promises to leave the program alone.

Studies have shown that CHIP helps reduce hospitalizations and child mortality, and improves quality of care. The program has bipartisan support. However, HHS Secretary Tom Price voted twice against expansion when he was a congressman.

CHIP is up for reauthorization by Sept. 30 and governors recently spoke out in favor of expanding it. In his budget proposal, Trump proposes a two-year extension of CHIP, but also suggests program cuts, including the matching rate for states.

Jim Kaufman, vice president of public policy at Children's Hospital Association (CHA), told Healthcare Dive that CHIP helps children’s hospitals.

“CHIP is good for kids, and that makes it good for children’s hospitals and children's providers.”

Jim Kaufman

Vice President of Public Policy, Children's Hospital Association

Edwin Park, vice president for health policy at the Center on Budget and Policy Priorities, told Healthcare Dive that the cuts would shift costs to states and reduce benefits. He said Trump’s budget would eliminate a 23-percentage-point increase in each state’s federal CHIP matching rate, which is in effect until 2019. That would mean $3.5 billion cut from the program.

The budget would also cut CHIP funding for children with families that have incomes above 250% of the federal poverty line, which would affect 28 states and Washington, D.C. that provide CHIP coverage to children above the income threshold, according to Park.

This will mean states will need to pick up more of the CHIP program costs if they want to maintain the current coverage level. Park said he believes Congress will reauthorize the program, but questions remain about CHIP’s funding and benefits.

Children are about half of Medicaid's enrollment

The CHA released a report prepared for the organization by Avalere in May that said changes to Medicaid will hurt children, who are the largest group covered under Medicaid. Disabled children will feel the brunt of the pain.

Park said Trump’s proposed budget goes well beyond the Medicaid cuts included in the American Health Care Act (AHCA). The House plan would cut Medicaid by 24% over 10 years. Trump’s budget would reduce the Medicaid budget by 45% in that period.

Park said children make up about half of Medicaid enrollment, but cause very little in costs. Seniors and people with disabilities make up about one-fifth of enrollment, but about half of costs.

Forty-five percent of children with special healthcare needs are on Medicaid. If those children don’t get insurance elsewhere, hospitals would feel the financial burden of caring for those higher cost children without getting reimbursed by Medicaid.

The House approved the AHCA in May, which proposed Medicaid per capita caps starting in 2020 that would be based on 2016 federal Medicaid spending. In a study earlier this year, KFF said that creating a Medicaid block grant or per capita cap “would shift risks and costs to states, enrollees, and providers and could result in reductions in coverage for children.”

Children’s hospitals would be affected more than many other hospitals. The average children’s hospital pay mix is about 54% Medicaid, so children’s hospitals are especially vulnerable if there are large cuts to Medicaid and CHIP at the federal and state levels. Uncompensated care has dropped since CHIP and Medicaid expansion. Kaufman estimated that uncompensated care is an average of about 2% now.

“Since Medicaid is the largest payer of children’s healthcare services and the largest payer for children’s hospitals, the proposed Medicaid cuts included in the AHCA would have a significant impact on the more than 30 million children covered by Medicaid,” said Kaufman. “The states would cut coverage, benefits and access to care. Cuts of this magnitude will have a negative impact on all children’s healthcare.”

The Congressional Budget Office predicts 23 million Americans would lose their health insurance by 2026 under the newest version of the AHCA.

Park said the CBO score confirms the House bill isn’t fixable. “It’s clear just from the cost shift that kids would certainly be facing cuts if the House bill was enacted,” he said. “And that would be particularly problematic for kids who need Medicaid coverage that isn’t provided by private insurance.”