Economic issues Impact on Health Care

5 10 2009

Economic issues Impact on Health Care

Cutbacks in Medicaid Funding!

  • More people applying to Medicaid – due to economy.

Though many of the proposed Medicare cuts and the ones already in progress are frightening and difficult, at best, to deal with, the thought of more Medicaid cuts puts more pressure on the people that need the program most.”

“The problem is that rather than helping keep the benefits for people, once someone has lost them, the state and county end up paying untold thousands of dollars for emergency room visits that take the place of doctor visits. Keeping people on Medicaid and allowing new ones to get on it save the state and county money, short term and long term.”  The Medicaid and Medicare Center   (               june30th, 2009


  • 10% unemployment is roughly a 5% increase in unemployment over “normal” and therefore causes a comparable 5% decrease in income tax revenue.
  • Less revenue in state coffers for (Medicaid) matching funds – due to lower tax revenues
  • Unemployment is projected to grow to 10.1 percent by 2/2010 and stay there for a while.

“Looking ahead to next fiscal year, the outlook is that FY 2010 almost certainly will be a very difficult year, with the potential for widespread program cutbacks and provider rate cuts that will affect millions of Medicaid beneficiaries.”  The Kaiser Commission on Medicaid and the Uninsured. January 2009

Federal Stimulus Program misses the mark!

American Recovery and Reinvestment Act of 2009 (ARRA)

  • Section 5001: Increased Federal Medical Assistance Percentage (FMAP)
  • Section 5001 of the ARRA provides eligible States with an increased Federal Medical Assistance Percentage (FMAP) for 27 months between October 1, 2008 and December 31, 2010
  • Even though the Recovery Act provides more federal money the problem is that it requires the states to come up with more money to qualify and the states are stretched thin already by reduced tax revenue.


What does the future hold?

  • Economic indicators show that the recession has bottomed out and started a rebound.  The banking, Wall Street, and housing industries are picking up.
  • Unemployment is a lagging indicator and will not show improvement till later.
  • Additional provisions and expenditures of the Stimulus package will go into effect in 2010 and may provide additional help to the economy.

So things should continue to improve.

But what can Service Providers do in the meantime?

All businesses (including health services) consist of the following three components.

  • Labor: Professional Services – patient contact hours (labor)
    • Labor can be automated – for tracking and monitoring but professional contact hours cannot be eliminated.  They can be optimized and made more efficient but when it comes to the physical care services they still must be performed by people.
    • Plant:  Physical Goods and Facilities: drugs, materials, clinics, and associated utilities
      • Drugs and materials can be negotiated and cost reductions from bulk purchasing
      • Facility expenses can be reduced by providing services remotely or off-site reducing the amount of physical facilities required.
      • Administration:  Paperwork, compliance, documentation, management, tracking, error prevention, fraud prevention, privacy protection, reporting, certification, training, communications, scheduling, billing, accounting, etc.
        • Administrative  overhead which is a very significant expense is the most fertile area where expenses can be reduced with Information Systems Technology


We provide IT solutions for Home Health, Mental Health and Group Homes that can improve your operations and reduce your expenses.

  • Schedule / sign up for a webinar on our Human Services solutions
  • Call to set up a session with one of our consultants to work up a demonstrable return on investment model (ROI)

We may not be able to totally offset the impacts of the economy and funding cuts but we assuredly can help.



Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

<span>%d</span> bloggers like this: