Illinois hospitals say that Gov. Pat Quinn’s proposed $2.7 billion in Medicaid savings would devastate their bottom line – and significantly harm the state’s already fragile social safety net.

“We are deeply concerned about what we may have to do to restrict access to care,” says Wayne Learner, president and CEO of Holy Cross hospital on Chicago’s South Side.

The Illinois Hospital Association -- which asserts that one in three hospitals in the state are currently losing money -- hoped that they could work with state lawmakers to undo key reductions.

“It’s still very early – we can still work with the Illinois General Assembly,” says Association spokesman Danny Chun.

The General Assembly is expected to complete its annual budget by May 31, which will go in effect July 1, the start of the fiscal year.

Quinn announced a little more than $2 billion yesterday in cuts to Medicaid, the federal-state health care program for the poor, elderly and disabled, along with $675 million in projected revenue from raising the cigarette tax $1 a pack.

The $2 billion in cuts translates to $1 billion in state savings, as the federal government matches each dollar Illinois, and every other state, spends on Medicaid. “The state is only realizing half the savings, and you are giving back money to the federal government,” Chun says.

The cuts include a $675 million total reduction in how much the state reimburses Medicaid providers, or eight percent of their total reimbursement.

Learner is upset by the extent of the cut and that the state did not discriminate between financially stable and fiscally struggling hospitals.

“All providers will not be affected the same way,” Learner says. “Some consideration has to be made to those hospitals that have high Medicaid loads and don’t have resources like endowments and philanthropy.”

The reductions also include cutting or entirely eliminating 58 line items in the state’s Medicaid budget, for a total of $1.35 billion in savings. 

Among the cuts:

* The elimination of Illinois Cares Rx, which provides prescription drugs to 180,000 residents. This move would save the state $72 million. The governor’s office states that the national health care reform law – which the U.S. Supreme Court may very well throw out – will assist in making up some of these drug costs.

* A moratorium on new admissions to intermediate care nursing facilities, which mainly take in people with mental illnesses. The facilities take in about 1,800 new patients each year.

* Enhanced procedures to verify that people who get Medicaid services are eligible for the service, which the state projects will net $120 million in savings: This is perhaps the biggest cut to which Illinois hospital groups give a nod. Indeed, Chun claims that the state could save even more than $120 million by better checking eligibility.

Quinn and state legislative leaders have focused on Medicaid – along with public employee pensions, which the governor announced proposed reductions to today – as of late when it comes to the state budget. 

The governor – along with a bipartisan legislative working group that failed to come up with their own proposals – is set on $2.7 billion as the amount the state must cut from Medicaid.

This is all to the consternation of progressives – like the Chicago think tank Center for Tax and Budget Accountability, or CTBA – who wish Quinn, a Democrat, and the Democratic-controlled General Assembly would focus on generating revenue, not cutting services.

For example, CTBA would like to see the state change from a flat to a graduated income tax to help plug its budget hole.