WASHINGTON – Health care legislation proposed last week by Senate Republicans would have a negative impact on the credit ratings for most hospitals, Moody's Investors Service said Monday.

The warning covers the 31 states and the District of Columbia where Medicaid was expanded under the Affordable Care Act, but not the other 19 states.

"The bill is credit negative for both for-profit and not-for-profit hospitals because various aspects would reduce the number of people with insurance coverage and the comprehensiveness of that coverage,'' Moody's said.

James L. Madara  is executive vice president and CEO of the American Medical Association
James L. Madara, American Medical Association

Fitch Ratings also issued a negative outlook for hospitals based on the reduced Medicaid funding to states. Hospitals would be hurt by “changes in the payor mix and lower patient volumes for public hospitals,’’ Fitch said.

The proposed legislation, called the Better Care Reconciliation Act, joins the House-passed American Health Care Act in repealing the 10% cap on the state share of expanded Medicaid coverage.

In addition, states would have to choose from either a per capita limit on their federal share or a block grant.

With the 48 Senate Democrats opposed to the bill and five of their Republicans colleagues announcing their opposition, the legislation probably will need revisions in order to gain the votes needed for passage. Republicans can afford no more than two "no'' votes assuming Vice President Pence casts a tie-breaking vote.

Opposition to the legislation has been widespread in the medical profession and among advocacy groups such as the AARP.

The National Association of Medicaid Directors said the Senate bill "does formalize several critical administrative and regulatory improvements," but that cannot compensate for the federal spending cuts. "It would be a transfer of risk, responsibility, and cost to the states of historic proportions.’’

American Medical Association Executive Vice President and CEO James L. Madara said in a letter Monday to Senate Majority Leader Mitch McConnell, R-Ky., and Senate Minority Leader Chuck Schumer, D-N.Y., that the bill violates his profession’s credo to “do no harm.’’

“We believe that Congress should be working to increase the number of Americans with access to quality, affordable health insurance instead of pursuing policies that have the opposite effect, and we renew our commitment to work with you in that endeavor," Madara wrote.

Drew Altman, president and chief executive of the Henry J. Kaiser Family Foundation, wrote in an op-ed in The New York Times last week that the Senate and House bills each “would effectively kill the expansion of Medicaid that was allowed under the Affordable Care Act.’’

The expansion brought medical coverage to an additional 14 million people.

“Expansion states would have to come up with hundreds of millions, in some states billions, of dollars from their own budgets to replace those lost federal funds,’’ Altman wrote. “Based on my experience as a state human services commissioner — for a Republican governor — I predict that few if any states will be able to do that. It is also highly unlikely that other states will join the expansion once the federal match is gone."

Moody's said the Medicaid funding reductions "would likely lead states to lower Medicaid enrollment or covered services, which would reduce services and create higher uncompensated care costs for hospitals.’’

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