NYC Public Hospitals See Big Financial Hit From Healthcare Law

(Reuters) - The New York City Health and Hospital Corporation expects to lose $2.3 billion over eight years from the Medicaid cuts included in President Barack Obama's new healthcare law.

The U.S. Supreme Court on Thursday upheld Obama's signature healthcare overhaul requiring that most Americans get insurance by 2014 or pay a financial penalty.

Alan Aviles, the HHC chief executive officer, said on Thursday that although more people will have insurance, this will not make up for the loss of Medicaid funds.

HHC is the nation's biggest public hospital system and it serves 1.3 million New Yorkers every year.

Aviles did not yet know how much the city's public hospitals would save by treating more insured patients. But It is highly unlikely that it will come remotely close to $2.3 billion, he said.

The city's 11 public hospitals and nursing homes last year treated 477,957 patients who had no insurance - a 20 percent increase since 2006.

Elected officials estimated that New York state has about two million residents who have no health insurance and the vast majority of them live in New York City.

About 1.2 million of these people are expected to gain health insurance under the new federal law. But New York City also has about 500,000 illegal immigrants, and only some of them have insurance.

New York, like some other areas of the country, has an unusual high proportion of undocumented immigrants who will not be eligible for expanded coverage, Aviles noted.

Moody's Investors Service said the healthcare reform remains a credit negative for not-for-profit hospitals.

The new law should result in a material reduction in uncompensated care provided by not-for-profit hospitals but over the next 10 years, the federal government will cut Medicaid reimbursements to hospitals by $14 billion.

Medicaid is the state-federal health plan for the poor, elderly and disabled.

The city's public hospitals are already under considerable financial pressure. In early June, Aviles projected a $566 million deficit for fiscal 2013, which starts on July 1, due to Medicaid cuts and the increasing costs of its 38,000 workers' benefits and pensions.

That budget gap is expected to nearly double, hitting $1 billion, by 2016.