Arkansas looks at fallout from ‘fiscal cliff’ vote

UAMS seen taking biggest hit

State officials were still assessing Wednesday the Arkansas economic fallout from Congress’ deal averting the “fiscal cliff” - automatic spending cuts and tax increases.

But the New Year’s compromise helped the state avoid sweeping cuts in government programs - at least in the short term.

So far, the University of Arkansas for Medical Sciences appears to have suffered the biggest hit. Part of the budget deal brokered by Vice President Joe Biden and Senate Minority Leader Mitch McConnell includes $4.2 billion in Medicaid cuts to hospitals that provide care to the uninsured over the next 10 years. The latest reduction will add to cuts already imposed by the Patient Protection and Affordable Care Act, according to an article in Kaiser HealthNews.

In December, Dr. Dan Rahn, UAMS’ chancellor, said the new health-care law will reduce “disproportionate care” payments by $22 million in 2014. On Wednesday, Rahn said it was too early to say how much more UAMS stands to lose.

“The details remain unclear,” he said.

But Rahn said the reasons for the Medicaid cuts - to avoid reducing Medicare payments to doctors - was wrongheaded.

“We all agree that our health system needs some fundamental change to rein in cost growth, but to preserve payments with one sector at the expense of another, it really doesn’t move the ball downfield, in my opinion. We all need to be working together on strategies - lower cost, better patient experience, better care - and we can’t do that with just one sector picking up the cuts,” Rahn said.

Last year, Rahn urged health-care providers to push for expanding the Medicaid rolls by 250,000, an option given to states under the health-care law. If expansion occurs, UAMS would gain an estimated $42 million through reimbursements from formerly uninsured patients now covered either by expanded Medicaid eligibility up to 138 percent of poverty or through the state’s insurance exchange - canceling out the effects of the cuts to uncompensated care.

Across the state, hospitals are expected to provide $450 million in uncompensatedcare by 2014. If expansion is approved, uncompensated costs would fall to $250 million, according to the Arkansas Hospital Association.

The fiscal deal appears to have avoided any immediate financial consequences for state government. But looming battles over automatic spending cuts later this winter may still bring pain to state coffers.

The state is continuing to monitor talks in Washington to see if automatic spending cuts, also known as sequestration, will be made at the federal level, said Brandon Sharp, budget administrator for the Department of Finance and Administration.

“At this point we don’t expect any cuts at the state level at this time,” Sharp said.

Nearly 29 percent of the state’s current fiscal-2013 budget comes from federal funds. When the states were told to prepare for a possible reduction in funding, Arkansas was faced with losing $54.9 million in nondefense discretionary spending, according to a report by the Federal Funds Information for States, a subscription service that measures the impact of federal fiscal decisions on the states.

State agency directors had already been warned that reduced federal funds would not be replaced with state money and to plan for that possibility. If Congress decides to enact spending cuts, “the majority of that planning will occur at the individual state agencies,” Sharp said.

If the state were to replace federal funds with state money, it would require legislative action.

The sequestration would affect a variety of programs, including K-12 school funding and how students pay for college.

Title I grants, which are awarded to improve academic achievement in areas with high percentages of low-income families, would be reduced by $11.9 million. Pell grants would also be reduced by $310 per student in the 2013-14 school year and $400 per student the next year.

The Department of Human Services, which faced about $7.5 million in cuts through the sequestration, has not yet seen any reduction in federal funding, said Amy Webb, a spokesman for the agency.

“It appears that the deal brokered [Tuesday] will not [have an] impact on any of our programs,” Webb said in an e-mail. “However, if the automatic spending cuts that are still looming go into effect, they would have an impact on our clients.”

The department has said that the cuts would mean fewer employees working with children and bypassing a summer utilities assistance program for low-income families. The department would also not be able to provide funds for about 500 families for child-care assistance.

Northwest Arkansas, Pages 7 on 01/03/2013

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