ASPECTS OF NATIONAL by William B. Mansfield
HEALTH INSURANCE: Partner, Denver Office
PROSPECTIVE HOSPITAL RATES
Presented before a meeting of ECHO (Electronic Computing, Health Oriented), Denver, Colorado-March 1972
The purpose of my talk is to report on the introduction in Colorado of a system for budgeting state Medicaid reimbursements based on future cost estimates rather than on computations of incurred costs retrospectively determined. I shall also describe some of the difficulties with the incurred costs system and some of the background leading to the decision to change.
In November, 1970, Mr. Con F. Shea, executive director of the Colorado Department of Social Services, expressed to me his concern for the department's ability to meet the calls on its funds. He felt he might be forced to prorate monies then remaining of the appropriation granted for inpatient hospital care over the rest of the fiscal year ending June 30, 1971. The magnitude of retroactive cost adjustments had not been anticipated in the budget. If the legislature should refuse to approve a supplemental appropriation, he would have no choice other than proration.
Many of the states have had this budgetary problem and several—notably California and New York—have been prominent in newspaper articles about efforts to finance and control their Medicaid programs. The Georgia Medicaid program announced in June 1971 that beginning July 1 it would reimburse only 90 percent of the amount of Medicaid bills submitted to it.
In the spring of 1971, the Colorado Department did receive a supplemental appropriation for inpatient hospital care, but the hearings were rough. The Joint Budget Committee of the legislature asked why the department could control so well the much larger nursing home program but was seemingly not in control of the hospital program.
SOME REASONS FOR THE DIFFICULTIES
There were, of course, many reasons, but primarily it was because no one in Colorado knows what hospital costs have been until cost reports are received. Too many Colorado hospitals were accepting the same interim rate of payment for a Medicaid patient as they received for a Medicare patient,