By December 31, the Centers for Medicare & Medicaid Services (CMS) will announce how it will distribute the $50 billion Congress approved this summer for the Rural Health Transformation Program (RHTP) under the Working Families Tax Cuts Act
CMS says 50 percent of the funds will be distributed equally among the states it approves. The remaining 50 percent will be “based on a variety of factors, including rural population, the proportion of rural health facilities in the State, the situation of certain hospitals in the State, and other factors to be specified by CMS in the NOFO (Notice of Funding Opportunity).”
Analysts say this type of “scorecard” could be seen as an end run around state practices that limit health care competition and drive up prices, such as “scope of practice” and certificate of need (CON) laws
“Finally, a government policy that incentivizes states to get out of their own way,” write Jaimie Cavanaugh and John Sweeney of the Pacific Legal Foundation in The Hill.
Largest Investment Ever
“Rural communities are the bedrock of America,” said U.S. Health and Human Services Secretary Robert F. Kennedy, Jr, “They have waited too long for Washington to act. Now, at last, we are acting with the largest investment ever made to improve health care for rural Americans. This $50 billion program is about delivering dignity and dependable care to rural communities, making sure every American has access to affordable, high-quality treatment.”
CMS says the program has five strategic goals, including the promotion of innovative health care models, preventative health, improving provider efficiency and sustainability, workforce development, and improving access to digital health tools.
Competition Busters
Scope of practice laws limit the services health care professionals can offer under their state licensing laws. CON laws, enacted decades ago, restrict the development, expansion, or acquisition of health care facilities unless approved by a state regulatory board. The idea was to improve quality by restricting investment to community “need.”
CON laws have not achieved the intended effect and, in fact, have often accomplished exactly the opposite, says Sofia Hamilton, a healthcare policy analyst for Americans for Prosperity.
“CON laws have allowed large hospital systems to crowd out competition and essentially monopolize local health care markets,” said Hamilton. “Although supporters argue CON laws protect access in rural communities, the lack of hospitals, emergency rooms, surgery centers, and other essential services shows the opposite is true.”
The Rural Health Transformation Program is a welcome opportunity because it incentivizes “states to repeal their CON laws so their health care markets can grow without the unnecessary barriers that ensure rural communities continue to be health care deserts,” said Hamilton.
Realities of Rural Living
While rural communities could benefit from $50 billion to improve health care, more fundamental transformations are necessary to ensure the ongoing viability of rural hospital services, says Roger Stark, M.D., and American College of Surgeons fellow.
“Rural hospitals comprise 35 percent of all hospitals nationally, yet they only account for 8 percent of all discharges,” said Stark. “From a health insurance standpoint, Medicare covers a larger share of patients in rural hospitals compared to urban hospitals, and Medicaid and private insurance cover roughly the same number in metropolitan areas. Medicaid covers half of all births in rural hospitals. In other words, rural hospitals are more dependent on government payments than urban facilities.”
Stark says that as government bureaucrats ratchet down reimbursements for hospitals in general, rural facilities are more vulnerable to these decreased payments.
“Rural hospitals have a higher percentage of negative financial margins when compared with urban hospitals,” said Stark. “This fact, coupled with the waning interest on the part of doctors to practice in small towns, leaves the future of rural hospitals and the patients they serve very tenuous.”
‘Practical Solution’
Rather than “simply giving more taxpayer money to low patient volume rural hospitals with their ever-declining provider interest,” it is necessary to consider alternatives,” says Stark.
“One very practical solution, one that is already being used in a few smaller communities, is to close the existing hospitals and establish urgent care clinics,” said Stark.
“These could be staffed by nurse practitioners or physician assistants rather than more expensive doctors,” said Stark. “A very robust transport system, including ground and air transportation, would be needed as well to get critically ill patients to a major treatment center for state-of-the-art care. Arguably, patients would be better served, and costs would be much less.”
Government-created ‘Distortions”
The Heartland Institute, which co-publishes Health Care News, included the repeal of state CON laws in its 2024 American Health Care Plan (State Solutions).
“All government action creates economic and social distortions, so it is always good to move money away from programs that raise demand for a taxpayer-funded service, and into projects that increase supply,” said S.T. Karnick, one of the authors of the proposal.
“The former raises costs and reduces access, whereas the latter cuts costs and increases access to the services in question,” said Karnick.
“This program is an effort to do the latter,” said Karnick. “Although the RHTP program offers just a marginal change in potential funding of rural hospitals, it can provide a financial bridge to keep them from closing. That is a positive change.
When hospitals close, “many states’ certificate of need laws interfere in the replacement of services in rural areas,” said Karnick. “The RHTP forces policymakers to decide what is more important to them: suppressing the supply of health care or using this program to remedy some of the enormous harm government interference in the nation’s health care system is doing in their states.”
Kevin Stone ([email protected]) writes from Arlington, Texas
