Nebraska likely to get USD 1B to boost Medicaid rates for hospitals

Nebraska could get more than $1 billion of federal money to boost Medicaid rates for hospitals and other health care providers under a bill that won easy first-round approval in the Legislature Thursday.

The only controversy about Legislative Bill 1087, the Hospital Quality Assurance and Access Assessment Act, was whether to put a sunset date on the program.

State Sen. Mike Jacobson of North Platte, who introduced the bill, said Gov. Jim Pillen had insisted that the program expire on Dec. 31, 2026. Such expiration dates are often used to force lawmakers to review programs and decide whether they are worth keeping.

Jacobson said he doesn’t like the sunset provision and would prefer the expiration date be pushed back at least a year. But he said it is part of an agreement with the Pillen administration that helped the bill advance.

But Sen. Danielle Conrad of Lincoln said the sunset weakens the proposal and argued for lawmakers to defend the Legislature as a policymaking branch of government equal to the governor.

“There is a fine line between negotiation and capitulation,” she said.

LB 1087, with an amendment reflecting the negotiated agreement, would add Nebraska to the 44 states that have adopted a funding mechanism aimed at boosting federal dollars for Medicaid. Iowa recently implemented the mechanism and two other states are looking to adopt it.

Under the bill, Nebraska hospitals would pay an assessment of up to 6% of net patient revenue. Money collected from the assessment would be used as the state match to get more federal dollars.

Medicaid is a state-federal program that covers health care services for low-income Nebraskans. The federal government currently covers 68.6% of the cost of Medicaid services in Nebraska, meaning that each $1 of state funds brings in more than $1 in federal funds.

The legislative fiscal office estimated that the hospital assessments would total about $466 million per year, which would generate a little more than $1 billion of federal funds.

Almost all of the combined total would be used to boost Medicaid payment rates for inpatient and outpatient hospital care.

“I don’t know why we would not want to take $1 billion of federal money,” Jacobson said. “Do we want to be the chump out there that says, ‘No, we want to reduce the federal deficit?’”

He said the additional money would bring Medicaid rates close to the breakeven point for hospitals, providing them with a critical lifeline, without costing state tax money. Although hospitals vary in the proportion of Medicaid patients they treat, he said all should get enough to recoup their assessments.

Below-cost Medicaid rates have contributed to growing financial struggles among Nebraska hospitals. As of the fourth quarter of 2023, some 51% of the state’s hospitals were operating in the red, according to a survey by the Nebraska Hospital Association. Among smaller rural hospitals, that figure was even higher, with 59% losing money on operations.

Along with medical inflation and low Medicare rates, those losses have forced hospitals to cut services. In the last year alone, some hospitals have closed maternal care, behavioral health, home health, hospice, hospital-owned nursing homes or ended other services.

Under the agreement, LB 1087 would help with other health care priorities in Nebraska.

The bill would set aside 3.5% of the assessments, up to $17.5 million, to boost Medicaid payment rates for doctor, dental, nursing home and other services. It also could be used to keep children covered by Medicaid for a year at a time, rather than having to undergo eligibility reviews every six months, and could be used to support the state’s health information exchange.

The Nebraska Department of Health and Human Services could keep 3% of the assessments, up to $15 million, as an administrative fee. Another 0.5%, up to $2.5 million, would go to support clinical nursing training sites.

The agreement also calls for Nebraska hospitals to invest $50 million into health care workforce development efforts. Omaha News