When ailing patients come through the door at Deaconess Health Care in Northwood, CEO Pete Antonson said doctors and nurses do their best to help, even if a patient ultimately can’t pay for their care. When that happens, it means the small-town health system takes a financial loss.

That’s part of working in medicine. And fortunately, Antonson said, it’s been a smaller part since North Dakota joined the federal government’s expanded Medicaid program in 2013. That expanded program – available through the Affordable Care Act, or Obamacare – broadens the definition of who qualifies for Medicaid, offering coverage to tens of thousands more people. And it provides federal funds to pay for the vast majority of costs.

Hospital advocates describe the program as a runaway success. According to the Kaiser Family Foundation, expanded Medicaid was providing health insurance to 21,000 adult North Dakotans as of October 2019. Antonson said it helps provide about $300,000 to Northwood Deaconess last year. Over time, he said, that’s a rural hospital’s difference between financial stability and slowly, cumulatively, bleeding money.

“None of us are getting rich out here,” Antonson said. “And we’re all skating out on pretty thin ice routinely. And Medicaid expansion has really helped firm up the ice under our feet a little bit.”

But North Dakota politicians are looking skeptically at Medicaid this year as spending in the expansion program soars. Gov. Doug Burgum, speaking in his December budget address, pointed out that North Dakota spends far more per-person on Medicaid expansion than any other state, at about $14,000 per patient. That’s far more than Alaska, the second-highest spender, at $9,000.

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Hospital advocates, pressed on this, point to North Dakota’s uniqueness. The state is different from Alaska and Delaware, and other states lower on the list. It has a high number of rural, critical access hospitals. In past battles over health care costs, they’ve also pointed to North Dakota’s need to pay medical professionals more than average to attract them and retain them.

And still more advocates say the spending supports critical programs and keeps the lights on in rural hospitals, where financial margins often are thin.

“We’re not buying $75 hammers and gold-plated toilet seats,” said Andy Lankowicz, president of CHI St. Alexius Health Devils Lake. “We’re buying imaging equipment and we’re hiring nursing staff and things like that. My hospital, it’s antiquated, but we take very good care of it. And we’re able to because we have the resources to be able to do it.”

But Caprice Knapp, who heads the state Medicaid program, said that high number is primarily driven by the expanded Medicaid program’s payment of commercial reimbursement rates, which deliver far more money to health care providers than traditional Medicaid rates. And Burgum, whose office did not respond to an interview request, is still concerned about taxpayers’ value for their money.

“Just because as a state we undertook Medicaid expansion – along with 37 other states – does not mean we should reimburse providers far more for each Medicaid expansion client than any other state,” Burgum said in his December budget address.

The ensuing tug-of-war over Medicaid spending is now pitting budget hawks, concerned about government bloat, overspending and high heath care prices, against hospital advocates – with tens of millions of dollars in health care spending in the balance.

Possible solution

One possible solution is to change who runs the state's expanded Medicaid program and tweak the rates it uses to pay providers. At present, expansion coverage is administered by Sanford Health Plan. But the Legislature could transfer it, as soon as next year, to the state, which already administers Medicaid for the traditional, non-expansion pool of patients.

Those changes would mean spending less taxpayer money on health care. Alan O’Neil, CEO of Grafton Unity Medical Center, wrote in a memo to legislators that the change could cut $97 million in annual state and federal spending. A separate memo he sent to the Herald argues that health care is the state’s second-largest employer; its elderly population, vast rural areas and the ongoing pandemic create funding needs.

“All during this pandemic, the governor almost daily has very deservedly thanked all of the hospitals and front line healthcare workers (amongst others) for our valiant and selfless service,” he wrote. “...It just seems like an incredible double standard to publicly praise the hospitals and others continually, and oh by the way – we are going to cut your reimbursement in the near future.”

Meanwhile, Knapp, the state Medicaid director, said the change could actually mean better benefits packages for patients. North Dakota’s traditional Medicaid has broader dental coverage, for example, than its expanded Medical coverage. She points to the budget-cutting process now playing out during the legislative session. Medicaid expansion is funded at about 90% by the federal government, whereas others have a far different mix of support.

“If I cut a (Medicaid expansion) dollar, I only get 10 cents savings on the (state’s) general fund, whereas in all of these other programs, it’s usually a 50-50 match. And so if I cut a dollar, I get 50 cents in savings,” Knapp said, imagining a hypothetical government trying to cut $100 in spending. She argued the difference in federal matching levels means there’s unfairness built into whose dollars are easier to cut.

“All those folks who came to testify about their budgets being cut again – you have to disproportionately cut that group to get your $100,” she said.

A spokesperson for Sanford Health referred the Herald to the North Dakota Medical Association, where executive director Courtney Koebele expressed support for keeping commercial rates and a third-party insurer in place.

This is a debate that’s been ongoing for years, and was shot down in 2019 when state legislators declined to take up Burgum’s suggestion that Medicaid expansion be streamlined, potentially allowing the state to boost behavioral health funding.

"I think this (is a point Gov. Burgum) has been very clear about ... trying to reinvent government, create efficiency," Chris Jones, the Department of Human Services director, said in 2019. "And we need to look at all dollars that are spent as it relates to the provision of services."

RELATED: North Dakota House committee rejects major changes on Medicaid expansion

Hospital advocates are quick to point out that more money helps provide more services, though. Tim Blasl, president of the North Dakota Hospital Association, said those higher rates and big federal spending help cover the cost of care far more effectively than traditional payments. And they help keep essential programs running throughout the state. One hospital executive pointed to North Dakota’s nation-leading effectiveness in distributing COVID vaccines as proof that a well-funded system helps boost state health.

And the money is a boon as the health care industry grapples with coronavirus. Grand Forks’ Altru Health System has withstood a withering combination of financial hardships in recent years – launching a new hospital project after a clinic building failed, pausing that project once the COVID pandemic struck and laying off workers last year.

“We're not planning on contingency,” Altru CEO Dave Molmen said of any potential shifts in Medicaid funding. “But I think it would be safe to say that that would be millions of dollars of impact.”

Question of costs

Behind the fight over Medicaid, there’s a bigger question of costs throughout North Dakota’s health care industry. A study from state Insurance Commissioner Jon Godfread, an elected Republican, points out that the per-capita hospital expenses led the country in 2017, with operating expenses growing about 8% between 2010 and 2018 (Blasl said he questions the study’s methodologies.)

RELATED: North Dakota hospitals rank high in costs, salaries and utilization, study finds

“This whole study, to me, is a little bit of a canary in a coal mine,” Godfread told the Herald in December. “If hospitals’ cost trends continue where they are, health insurance is going to continue to get more unaffordable. If I’m insuring health care delivery, and that keeps going up, my insurance is going to keep going up.”

And the debate over North Dakota’s price of care figures into a broader national discussion on the same topic. A RAND Corporation study, published in September, showed the same procedures and care billed to private insurers at 2.5 times the rate they’re paid by Medicare (Medicaid’s government-funded sibling, aimed at seniors.) The study raised difficult questions about price accountability in large hospital chains nationwide.

RELATED: Godfread has urgent message for North Dakotans: Remember Affordable Care Act open-enrollment period is ending

North Dakota’s changes to Medicaid would likely come in HB 1012, an appropriations bill for the state Department of Human Services. State Rep. Keith Kempenich, R-Bowman, the vice chairman of the House Appropriations Committee, said it’s too early to know for sure exactly what will happen. He downplays the likelihood of the state assuming direct control of the Medicaid expansion program, but left open the possibility that the Legislature could work to change reimbursement rates.

“This is still early in the session,” Kempenich said on Wednesday, stressing that it’s hard to know what will happen before more budget discussions happen.

Either way, a final decision – still likely weeks away – will be closely watched by hospital advocates, who worry that the system depends on those dollars.

“If you break Humpty Dumpty,” Antonson said, “it’s hard to put him back together.”