Minnesota health systems are doing better financially, but are bracing for a Medicaid cliff

Negotiations continue after nurses in the Twin Cities and Duluth walked off the job last week for a three-day strike. As of Thursday, the Minnesota Nurses Association and hospital management remained far apart, with nurses demanding nearly 30 raises over the course of their next contract and hospitals holding firm at just over 10 percent.

With such a large disparity, the All Things Considered team wanted to take a step back and understand how the state’s health systems are doing financially in this phase of the pandemic.

Saye Nikpai, a health economist and associate professor in the Department of Health Policy and Management at the University of Minnesota Public Health, joined Tuesday’s broadcast.

To hear the conversation, click play on the audio player above or read a transcript below. It has been edited for length.

In the midst of the pandemic, we heard a lot about how health systems were struggling financially because they had to cancel many procedures. What is your feeling about how they are doing now?

Yes, at the beginning of the pandemic, things were actually quite alarming because usage went down. And in our fee-for-service health care system, if you do less, that means less revenue is coming in.

So politicians stepped in and in the first year provided an unprecedented amount of subsidies to hospitals. In the first months of the pandemic, we saw over $100 billion flow out of hospitals. And if you add up how much has actually walked out the doors of hospitals over the last few years, it comes to about $200 billion.

What we can see from the research is that these subsidies really sustained the hospitals during the pandemic.

So if they are doing better, why do you think they are so cautious with wages?

Well, some of those grants have disappeared or were one-time grants. There are other types of subsidies that may not have taken the form of payments directly to these hospitals; they were in the form of things like Medicaid expansion.

So we have Medicaid in the state of Minnesota and in the United States, and it’s a workhorse when it comes to covering the uninsured. And we know that uninsured patients tend to stress the bottom line for hospitals.

When the pandemic began, we expected to see huge numbers of uninsured patients. Instead, what we saw is that policymakers’ actions to expand the Medicaid program in key ways led to people who lost that employer-sponsored coverage from losing their jobs, they took Medicaid.

The levers that policymakers pulled to make Medicaid more affordable, those levers will continue to be pulled until the public health emergency is over. Now, last I checked, the public health emergency was expected to end sometime in October.

When it officially ends, then those levers are released and about 16 million people nationally are expected to lose coverage. And that could be bad for hospitals.

What will 16 million people do when they suddenly become uninsured?

That’s a great question. So people rely on charity hospitals, they rely on federally qualified health centers. So some people will continue to receive care from the providers they already care for. It’s just that this care will no longer be compensated.

But what we know from economics 101—or at least health economics 101—is that when people lose that coverage card, they’re much less likely to visit providers and tend to use less care.

So we hear a lot of criticism about executive pay. How does this affect Minnesota’s health care systems?

So what we know from the for-profit hospital data is that when you compare the pay, on average, that a CEO gets to the wages that a hospital worker without a college degree would get, on average across the country, it’s about eight times [higher]. Whether this is too much or too little really depends on the circumstances.

But what I would say is that if you were a nurse coming out of this period of intense stress and potentially dangerous working conditions, you would look at the performance of hospitals post-pandemic and think it seems reasonable for them to share some of those gains.

Because one thing the research tells us is that many hospitals are back where they were before the pandemic started. But there are some hospitals — including in the local Twin Cities, Minnesota market — that are actually doing better than before the pandemic began because of these unprecedented subsidies.

So there was a lot of talk about hiring travel nurses for the strike and the pandemic. It’s a big expense, so I guess some people might think, well, why don’t they just pay nurses more?

So travel nurses fill a very specific niche and tend to be temporary, right? I think the likely organization, the hospitals, think differently about how they budget for traveling nurses versus how they budget for nurses who are part of the organization and will remain—hopefully—part of the organization for many years.

Many hospitals are interested in improving and maintaining nurses on their staff. So it’s hard to say whether, you know, hospitals think of these two types of nurses the same way. But I totally understand why nurses would think that maybe there is more of a budget hold-up than the hospitals are saying.

What else should we think about these negotiations?

So one thing I always have to remind myself when thinking about health care strikes is that I better be careful not to end up in hospital during a strike. What we know from research is that during strikes, patient care suffers a bit. We will have to see what happens after this limited three-day strike. Patients do not appear to have experienced a huge reduction in the quality of care.

But what the research also tells us about unions, and health care unions in particular, is that they tend to improve quality. So even if you don’t agree with the position that nurses get about a 30 percent raise, having a union benefits us all by improving the quality of patient care.

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