Reform measures need Medicaid fix

In the current rush to reform health care, with billions of dollars at stake and madly competing constituencies, bad ideas have the potential to become law, winner and losers selected by whim or mistake. It's about the only sure thing in a process that has been as chaotic and dysfunctional as any lawmaking in memory.

As an indication of both how broken the nation's health insurance system has become and the need to repair it, consider Medicaid. Even as it teeters near insolvency, the system essentially reimburses hospitals so little that payments don't come close to meeting the cost of care.

To make up for shortchanging hospitals so severely, the current system sends extra payments specifically to facilities with a disproportionate number of Medicaid recipients. Think of them as Medicaid bonuses.

As part of the health-care horse trading, the nation's hospitals agreed to give up those payments. Since reform is supposed to give millions of uninsured people access to insurance, hospitals figured that they could compensate for losing Medicaid bonuses with revenue from indigent patients they now treat for free.

That may be a reasonable equation for hospitals where free care for the poor is millions of dollars in an annual budget. But for others - and especially for the nation's children's hospitals - the deal could be financially disastrous.

At a place like Children's Hospital of The King's Daughters, nearly everyone is insured. Some kids come in covered, but the hospital also has employees who know how to find insurance for children, who have an easier time qualifying for government coverage than do adults.

As a result, 53.4 percent of CHKD's patient days are covered by Medicaid, while just over 1 percent have no insurance at all. Under the deal cut by the hospitals, CHKD would lose Medicaid bonuses, which totaled more than $19.3 million last year.

Because CHKD is so good at securing insurance for patients and has so few receiving free care, the hospital would have precious little chance to replace that money. The $19 million would simply disappear, leaving a huge hole in CHKD's finances. For a nonprofit operating with little cushion, the loss is enough to put CHKD into the red.

The nation's general hospitals didn't set out to do this to children's hospitals. It's just a simple difference in insurance dynamics that wasn't recognized until a deal was done. But this provision needs to be undone before it causes real damage.

U.S. Rep. Glenn Nye has petitioned the House leadership to exempt freestanding children's hospitals from the deal made with the hospital associations. His letter was signed by a group of 29 legislators from both parties representing districts with 22 children's hospitals.

It should be a simple correction. Call it an unintended consequence. Call it a mistake. But now that the problem is clear, there is no excuse for not fixing it.