Why Are the Children Crying?

Nearly 1 out of every 10 Americans (30 million out of 321 million) is a child on Medicaid. These innocent and vulnerable deserve the best — but to hear the political debate about health care, they seem invisible. Now is the time to stand up for them and their health. In an era dominated by a focus on “return on investment” the last thing we should do is fail to protect the health of our most important human asset — our children. When we save the life of a child, we give them a lifetime to create value in our communities that will be multiples of the total costs of their care. Sadly, there are policy proposals pending in Washington which could take us fundamentally in the wrong direction if we want to help these kids.

The recent passage in the House of Representatives of a bill that would cut Medicaid by $880 billion targets children’s health. The threats to children’s health are real. And scary.

First, let us set the scene. The front line for that fight is over funding for children’s hospitals. These bulwarks of our social and health safety net are only 5 percent of all U.S. hospitals, but offer about one-third of all hospital days for Medicaid recipients and more than half of the care for medically complex children. Likewise, these medical safety nets train the majority of pediatric specialists and conduct a wealth of research focused on curing diseases of childhood. Thus, children’s hospitals impact the lives of almost every child. Children deserve their own hospitals because they are not miniature adults. They have different diseases, conditions and needs. Keeping them strong keeps everyone strong.

The good news is that in the United States and a handful of other developed economies, children’s hospitals are a centerpiece of health care. Inventions ranging from fetal surgery to extracorporeal oxygenation and dramatic progress on childhood leukemia arose from children’s health research.

Despite the importance of children’s health, these hospitals receive only a portion, about 80 percent, of their costs when the patients are covered by the government program Medicaid. Often non-Medicaid spending, like provider payments and safety net hospital payments, help — but these programs are also under stress and face reductions. Medicaid pays only about two-thirds of the amount that its sister program, Medicare, pays for care given to the elderly. The shortfall in revenues for children’s hospitals is especially acute for safety net facilities where upward of three-quarters of the patients are on Medicaid (e.g. UCSF Benioff in Oakland, or Children’s Hospital of Los Angeles).

The stability of, and adequacy of reimbursement for health care offered to children’s hospitals is a central part of the puzzle. If Congress were to pass anything like the House just passed the Republican-sponsored American Health Care Act, it would be devastating for children’s health. About 40 percent of all patients in children’s hospitals are provided health insurance through the federal/state Medicaid program. The AHCA, and similar Republican proposals, would severely reduce Medicaid spending through conversion of a guaranteed access to care to a rationing scheme called “block grants,” or per patient per month resource limitation. For children’s hospitals, this will result in dramatic revenue losses. These reductions will cause closures for some of the 220 such children’s hospitals and limit medical care offered at others. The saddest part is that within this vulnerable population, about 6 percent of these kids present complex medical challenges. These children account for 40 percent of the total children’s hospital spending. It is the sickest of the sick kids who are likely to bear the brunt of the budget cutting in Medicaid.

Advocates for children need to stand and be counted as opposing pseudo-health care reform that hurts kids.


David Beier is a member of the Board of Directors of the University of California, San Francisco Benioff Children’s Hospitals (though these views are his own) and a managing director of Bay City Capital. Walt Rose is an entrepreneur and has served in leadership positions of hospitals, including a children’s hospital.

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