Indiana’s human services agency said Tuesday it will slice $34 million from its budget by paying hospitals less to treat Medicaid patients, renegotiating contracts with most of its vendors, moving some offices and leaving about 400 jobs unfilled.
However, the Family and Social Services administration will not reduce its Medicaid payments to doctors or cut "vital services" to the young, elderly, disabled and needy Indiana residents who receive social safety-net benefits, agency officials said.
"Our commitment is to the 1.2 million Hoosiers that receive benefits from us, and the cuts announced today will not take away from our clients receiving the benefits to which they are entitled," FSSA Secretary Anne Murphy said in a statement.
The president of the Indiana Hospital Association, though, said the cuts in Medicaid reimbursements "represent a significant blow" to hospitals’ ability to serve their communities.
FSSA revealed the budget cuts as part of austerity measures first announced last week by Gov. Mitch Daniels after state tax collections for the first four months of the fiscal year fell $309 million, or 7.4 percent, short of projections. Daniels ordered several steps including 10-percent agency budget cuts.
Growing state Medicaid rolls also are forcing the agency to tighten its belt, FSSA said. The state covers about a third of the costs of Medicaid, which provides health care for nearly 1 million needy and disabled Indiana residents, and the federal government picks up the rest. Those combined costs were projected to reach about $6 billion for the current fiscal year.
The hospital cuts will save a projected $10.6 million and affect all procedures covered by Medicaid, FSSA spokesman Marcus Barlow said.
Hospital Association President Douglas Leonard said the cuts will force hospitals to make difficult choices on which services they can provide. He said Medicaid already pays less than 50 cents on the dollar of the cost of some services.
"The gap between the cost of providing care and government payments received continues to widen and is simply unsustainable," Leonard said in a statement. "Like the state, hospitals are also hurting — we are treating more Medicaid and uninsured patients and seeing fewer patients with better-paying commercial health insurance."
FSSA said its greatest savings — $13.6 million — will come internally from not filling about 400 vacant jobs and combining local offices for vocational rehabilitation and FSSA’s Division of Disability and Rehabilitation Services. The agency has about 4,800 employees.
The agency also will save $9.8 million by negotiating lower rates with vendors and capping and eliminating some programs. For example, capping a program that now pays room and board for about 1,400 people in county homes for elderly and disabled residents will save $1.1 million, Barlow said.
The FSSA budget cuts do not affect the contracts the agency is renegotiating with subcontractors on its privatized welfare eligibility intake program. FSSA is redoing those contracts after Daniels fired lead contractor IBM Corp. last month.