‘We need to move forward’ under federal Medicaid funding cuts, rural Iowa hospital leader says

KNOXVILLE — Kevin Kincaid knows new federal reductions in Medicaid spending will have an impact on rural hospitals like the one he leads. The challenge facing those hospitals, Kincaid said Wednesday, is to work with government partners to minimize that impact.

Kincaid, the CEO of Knoxville Hospitals and Clinics, hosted a roundtable discussion with Iowa Republican U.S. Rep. Mariannette Miller-Meeks and Iowa Department of Health and Human Services Director Kelly Garcia on Wednesday.

After the roundtable, which was closed to the press, Kincaid, Miller-Meeks and Garcia spoke to reporters.

Federal Republicans recently passed legislation that will reduce future Medicaid spending by $941 billion over 10 years and increase the number of uninsured people by 10 million, according to the nonpartisan Congressional Budget Office.

Of that total, Medicaid spending in rural areas will decrease by $137 billion over 10 years, according to the nonprofit health care advocacy organization KFF.

The projected 10-year impact on Iowans, according to the American Hospital Association: 37,700 rural Iowans will lose Medicaid coverage and rural hospitals will see $2.7 billion less in Medicaid funding.

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Medicaid provides health care for low-income and disabled individuals and is jointly funded by the state and federal governments and operated by the states under federal guidelines.

The AHA has said the federal Medicaid spending reductions will have “a devastating impact on rural hospitals and patients,” and hospital officials across the country have warned that the spending reductions could force the closure of rural hospitals that already are operating on slim margins.

“I don’t know what those numbers are going to look like, but, we’re 100 percent committed — the Iowa hospitals — toward, ‘We got to move forward,’” Kincaid said. “The bill has been passed. We need to move forward in the framework that we can.

“And most of this conversation obviously has been around Medicaid, and Medicaid has got this complicated intersection between state government and federal government. So we need good partners in trying to figure out how to navigate that.”

Impact of $50 billion in grants for rural areas

Miller-Meeks pointed to the Rural Health Transformation Program that dedicates $50 billion in grants over 10 years to states, with half going equally to approved states and the other half distributed at the discretion of the U.S. Centers for Medicare and Medicaid Services, or CMS.

According to the White House, the program was designed to promote innovation in payment and flexibility, and long-term sustainability of rural health care.

Miller-Meeks said she has been talking to hospital leaders in her Eastern Iowa Congressional District to provide feedback to the administration about the grant program. She said she hopes to get input from Iowa stakeholders in health care, research and government, and take that to the administration.

“My goal is, while they’re still in this phase where they’re determining guidance, what does Iowa need? What most helps Iowa,” Miller-Meeks said. “And from my perspective, having been a director for public health, small states always get short shrift. We don’t want to be left out. We want to be able to, number one, be part of influencing what the application process is, what the grant process is, who’s eligible, and then also how that money is utilized.”

The CFO at Compass Memorial Hospital in Marengo, KCRG-TV reported, recently expressed concern that the $50 billion will not be enough to help rural hospitals offset the reductions in overall Medicaid spending, and that hospitals will wind up taking on more costs as Iowans lose Medicaid coverage.

Kincaid said he would not dismiss that concern, but added that officials do not yet know enough to say for certain how the spending reductions will impact rural hospitals.

Kincaid also expressed concern with changes in the federal legislation made to the state-directed payments program, under which states can require managed care organizations to enhance rates for hospitals and other providers to provide better care. Currently, state-directed payments are capped at the average commercial rate; the new law caps them at 100 percent of Medicaid payment rates in expansion states and 110 percent in non-expansion states. Iowa is a Medicaid expansion state.

“The directed payment program kept Iowa hospitals’ head above water. Well, now there’s changes to that program that’s going to really start taking effect in fiscal year 2028. So we know that’s coming,” Kincaid said. “So we have that window to work with our partners to: how do we bridge that gap?

“Because right now, I’d say the Marengo CFO is correct. … But you’re also just saying we’re not going to do anything over the next three years. So that’s, I think, the difference in trying to look at this, is that we’re working with our state and federal partners to develop — whether that’s a whole new program or tweaking the ones that are in existence — is how can we minimize that impact to rural hospitals?”

Garcia: Iowa will adhere to federal Medicaid work requirements

Garcia said Iowa will conform to Medicaid work requirements prescribed in the federal legislation and withdraw its request to enact state-based work requirements.

Statehouse Republicans earlier this year passed — and Gov. Kim Reynolds signed — legislation that required Iowa to submit a Medicaid waiver request to the federal government to allow the state to require 80 hours of work per month as a condition of Medicaid eligibility, with some exceptions.

The federal legislation includes similar work requirements for Medicaid recipients, including the 80-hour requirement.

Garcia said Iowa’s waiver request still is pending, and now the state is working with CMS to retract that component of the waiver request.

“We’ll be going with what’s in the federal bill,” Garcia said.

Reynolds, speaking to reporters Wednesday after a groundbreaking ceremony in Cedar Rapids, said the work requirements take effect next year and that the federal provisions are “very similar” to what was in Iowa’s legislation and waiver request.

“There’s not a lot of differences between the two,” Reynolds said, emphasizing the need to eliminate “waste, fraud and abuse” in the Medicaid system to ensure it benefits those who truly need it.

Gazette Deputy Bureau Chief Tom Barton contributed to this report.

Comments: (515) 355-1300, erin.murphy@thegazette.com

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