Stateline Story

Govs and Hospitals Try to Block Medicaid Cuts

A coalition of governors and hospital groups says it has the support of nearly two-thirds of the members of Congress to block a Bush administration plan to cut $5 billion in Medicaid funding.

Governors, state Medicaid directors and public hospitals are urging Congress to pre-empt a new rule proposed to take effect in September that would limit federal reimbursements to government-run hospitals.

The proposal would save $5 billion in the federal government's share of Medicaid bills, but it would force states to pick up the difference or to cut funding for government-run hospitals. State and hospitals officials say the cuts could jeopardize hospital services at a time when states and Congress are trying to deliver health care to more Americans.

"This proposed rule, which basically takes $5 billion out of the system, is going to be a major obstacle in terms of states moving forward with broad reform," Raymond C. Scheppach, executive director of the National Governors Association, said at a Capitol Hill briefing Wednesday (March 21).

The NGA sent a letter to congressional leaders asking them to pass legislation to stop the administration from imposing the new limits. Opponents of the cuts released a list of 64 U.S. senators and 263 U.S. House members who want the administration to drop its proposal.

State officials and hospitals hope to either persuade the administration to back off its rule or persuade Congress to override the change. The administration asked for public comment on the rules through this week; it would have to publish final rules before they could take effect.

Larry S. Gage, president of the National Association of Public Hospitals and Health Systems, said the fight over funding for public hospitals is frustrating for his members because people in the health industry would rather be spending time advocating for an expansion of health insurance for children than fighting a regulatory change.

Rick Pollack, executive vice president of the American Hospital Association, warned that the Medicaid changes would have far-reaching impacts, affecting even patients who aren't on Medicaid, the state-federal health insurance program that serves 59 million poor citizens. That's because hospitals would have less money to spend on trauma care, neonatal care and burn treatments.

"Many of you may think that this rule is really complex, but in reality it is really very simple. It would destabilize public hospitals and other safety-net hospitals. It would impact not just the low-income uninsured, but everyone in a community who relies on these providers. … And it would leave gaping holes in state budgets," he said.

The Bush administration first indicated it would try to make changes in the rules for payments to public hospitals in February 2006.

The rules it unveiled this year would crack down on what it calls "questionable methods of state Medicaid financing" that the administration contends allows hospitals to recoup more money than they should.

For example, the rules would prohibit hospitals from charging Medicaid more for a procedure than it actually costs. Hospitals say the long-standing practice allows them to offset shortfalls in funding for other services.

"We believe the lack of transparency and accountability undermine public confidence in the integrity of the Medicaid program as it is extremely difficult to track the flow of taxpayer dollars," administration officials explained in the draft of those rules.

"These arrangements, regardless of the merits, are hidden in archaic, nearly indecipherable language that may be further re-interpreted over time, placing federal and state dollars at risk as well as creating tensions and conflicts among the states," the administration added.

Budget considerations could potentially hamper efforts to block the administration's rules. It's unclear whether the Democratic leadership in Congress would require cuts elsewhere to offset the $5 billion in savings the administration was counting on when it drafted its budget.