Dr. Arthur Kellerman couldn't believe what he was hearing. He had just begun a fellowship assignment with the House Committee on Oversight and Government Reform in January when staffer Karen Nelson invited him to attend a briefing on Capitol Hill. Dennis Smith, director of the Center for Medicaid and State Operations, would be discussing a planned rule change by the Bush administration. "Don't say anything," Nelson told Kellerman. "Just listen." At the meeting, Smith said that the rule was simply an attempt to rebalance federal and state roles in financing Medicaid. But when he explained the details, Kellerman could barely contain himself. As Kellerman understood it, the rule would result in millions of dollars in funding cuts for hospitals across the country. "I'm hearing this and having a heart attack," he recalls. Nelson and others strafed Smith with questions and the briefing came to a close. But a new battle between Congress and the administration had begun.
It was a sobering start for Kellerman, 52, whose regular job is chairman of the Department of Emergency Medicine at the Emory University School of Medicine. For years, he's been sounding the alarm that hospital emergency rooms nationwide are in crisis. The stats are disconcerting: while visits to emergency departments increased by 26 percent from 1993 to 2003, hospital beds plummeted by 198,000, and 425 ERs around the country shut down, according to a 2006 report by the Institute of Medicine, a nonprofit arm of the National Academy of Sciences. Kellerman has experienced the impact firsthand at Atlanta's Grady Memorial Hospital, which is partly staffed by Emory doctors. Burdened by a growing pool of uninsured patients and squeezed by funding cutbacks, the institution is teetering at the edge of an abyss. Yet despite Kellerman's efforts to spur officials at all levels to action, Grady's condition has only grown worse. Part of the challenge: talk of ERs at the breaking point has become so familiar that it's hard to convey a sense of urgency. So last September, Kellerman headed to Washington, D.C., after winning a prestigious yearlong Robert Wood Johnson health- policy fellowship. He landed a spot working for the oversight committee now chaired by Democratic Rep. Henry Waxman, who's concerned about emergency-care issues and has taken on the Bush administration with zeal. Over the past nine months, NEWSWEEK spent time with Kellerman in both Atlanta and Washington, as he journeyed from a blood-soaked ER to the antiseptic corridors of power.
When he started his fellowship, Kellerman heard the same advice repeatedly: don't expect to accomplish anything substantive in a year; just come to learn. But of course, he says, "we all try to make a difference anyway." He had no shortage of ideas. Last year, he concluded his work on an Institute of Medicine committee that took a comprehensive and probing look at the state of emergency care in the U.S. The resulting series of studies, published last June, painted a despairing portrait, but also offered a raft of recommendations. Given the approaching midterm elections, Congress and the administration did virtually nothing. But after the Democratic takeover, Kellerman imagined things might be different.
The administration's planned Medicaid rule change, however, dashed those hopes. Kellerman realized this was no time for lofty ambitions; Congress would have to play defense. The rule, scheduled to take effect on Sept. 1, deals with the arcane world of Medicaid financing. Two provisions in particular dismay many in the health-care field. One limits states' ability to tap certain funding sources to meet their Medicaid obligations. The other stipulates that Medicaid reimbursements cannot exceed the cost of treating the Medicaid patient. While that provision may sound reasonable, says Larry Gage of the National Association of Public Hospitals, it doesn't account for the harsh reality confronting medical facilities that treat large numbers of the uninsured. Since these facilities don't get reimbursed for that treatment, they rely in part on higher-than-cost Medicaid reimbursements. As a result of the new administration rule, many hospitals may need to make drastic cuts in personnel, beds and more. "There isn't any question that if this regulation goes into effect in the ways it's proposed, there will be reduced safety-net services in many communities," says Gage, who considers the rule "the most important legislative or regulatory issue that we're confronting right now." Smith, the Medicaid official, whose center is part of the Department of Health and Human Services, responds that it defies logic to reimburse more than the cost of care and that state governments need to step up to meet their obligations. Smith argues further that some hospitals have abused the Medicaid financing system in the past—a point that even Gage concedes (although he maintains that the abuse problem has largely been eradicated).
The administration calculates that the rule change will reduce federal Medicaid expenditures by about $3.8 billion over five years. But Gage and others estimate the impact on hospitals will be much larger. At Grady, where 42 percent of revenue comes from Medicaid, Kellerman estimates that the hit could total $200 million over five years. "Grady is already struggling," he says. "This would put it out of business." Were Grady to close, the consequences would be far-reaching: the hospital is the only Level I trauma center (the highest designation) in a 120-mile radius of Atlanta, and one quarter of Georgia's physicians are trained there.
In the wake of the rule announcement, lawmakers and lobbyists leapt into action. Waxman and others wrote a letter in March to the secretary of the Department of Health and Human Services, urging that the rule be withdrawn. At a time when the nation is at risk of a terrorist attack, they argued, the ERs on the front lines are more crucial than ever; yet hospitals can barely cope with the routine traffic on a Saturday night. More than 150 House members from both parties signed the letter (Kellerman helped round up signatures, shuttling from one congressman's office to another). But the administration refused to budge. So lawmakers turned to another tactic: they inserted a provision in the Iraq supplemental-funding bill that would impose a one-year moratorium on implementing the rule. Though Bush vetoed that bill, many lawmakers are intent on including the same provision in the next attempt to craft an Iraq-spending measure. They seem to have plenty of supporters. In the oversight office, Kellerman sifted through about 450 responses to the rule sent by individuals and groups during the public comment period. "They ranged from negative to overwhelmingly hostile," he says.
Waxman now has a new plan to press the administration: an oversight committee hearing that will be held around mid-June, the one-year anniversary of the Institute of Medicine reports. Though the main purpose is "to examine the federal government's failure to address the crisis in emergency care," as he puts it, the new Medicaid rule will surely come up as well. Kellerman is now helping prepare for that hearing. He worries that if the administration manages to implement the rule, it may attempt other federal funding cuts that Bush has mentioned in his budget proposals. "It's hard to imagine congressmen will just allow hospitals in their home districts to get wrecked," says Kellerman. But as he has learned, Washington's ways—its partisan politics, its backroom dealing—can be confounding. All he can do is continue to hammer home the message of what's at stake. "Either we'll figure it out and start addressing [emergency care] in a serious manner," he says, "or the system will fail catastrophically." Kellerman has sounded such alarms before to little avail. Now, though, he's got a slightly bigger megaphone.