06/2002: State Legislative Update

Published June 1, 2002

Alabama Louisiana Tennessee
Arkansas Mississippi Texas
Indiana Oregon Wisconsin


Officials at the Centers for Medicaid and Medicare Services (CMS) declined to grant Alabama permission to continue to use the Medicaid upper payment limit, commonly known as the Medicaid loophole, under the state’s current formula.

Under the loophole, the state reimburses public hospitals and nurses for care provided to Medicaid beneficiaries at 150 percent of the Medicare rate. The state thus receives additional federal matching dollars. It then requires the facilities to return the extra reimbursements to the state, which can use the money for anything it desires.

According to a report issued a year ago by the Office of Inspector General of the Department of Health and Human Services, the Alabama Medicaid Agency in fiscal year 1998 made unauthorized changes to the way it computed the enhanced payments under the loophole. CMS officials maintain the state owes the agency about $548 million for “duplicate payments, improper leveraging of funds, and accepting federal overpayments,” according to Associated Press news reports.

According to CMS spokesperson Peter Ashkenaz, the agency will stop paying Alabama about $2 million annually unless the state increases its financial contribution to the Medicaid program.


In response to a $12.8 million cut to the Medicaid program imposed by Gov. Mike Huckabee (R), State Sen. Mike Beebe is seeking support for a plan that restores funding by using the state’s tobacco settlement fund. Because Medicaid costs exceeded the funding budgeted for the program last spring, Huckabee ordered the state to make “administrative adjustments,” charge co-payments, and tighten eligibility standards.


Cuts in Medicaid payments to Indiana nursing homes were halted by a court order. Responding to a budget shortfall for the Medicaid program in this fiscal year, Gov. Frank O’Bannon (D) ordered state officials to cut $660 million from the program by 2003.

Of that amount, state officials planned to cut $120 million from payments to nursing homes. The first phase was to include $22.5 million in cuts, $15.8 million of which have been implemented since October 2001. The Indiana Health Care Association responded by suing the state, alleging the state failed to follow “proper procedures” when making the cuts.

The court agreed and put on hold the remaining $6.7 million in cuts from the first phase. Medicaid Director Melanie Bella said the state plans to “correct the errors in procedure.”


An audit of the state’s Medicaid managed care program, called CommunityCARE, found the system is cutting costs by reducing emergency room visits. The reports suggests the state needs to do a “better job” of monitoring the program. The state plans by the end of 2003 to have all 500,000 Medicaid beneficiaries in CommunityCARE.

The program now covers about 75,000 beneficiaries who live in rural localities. The state had implemented CommunityCARE to encourage beneficiaries to receive most of their medical care at a doctor’s office rather than in an emergency room, where costs are more expensive.


With the state’s Medicaid program facing a $148 million budget shortfall this fiscal year, the state House of Representatives approved a package covering about $120 million of the shortfall. Under the bill, $108 million would be shifted from the state’s tobacco settlement fund to Medicaid, and reimbursements and services would be cut to save an additional $50 to $60 million.

The bill also would reduce payments to Medicaid providers by 5 percent. For beneficiaries, prescription drug co-payments would increase from $1 to $3; the number of prescriptions covered in a month would drop from 10 to seven; and eyeglass purchases would be limited to every five years instead of three.


The Oregon Legislature’s interim budget committee on May 1 approved a proposed expansion of the Oregon Health Plan (OHP), the state’s Medicaid program, about a week after Gov. John Kitzhaber (D) announced he had given up on altering the program.

Earlier, the legislature’s Leadership Commission on Health Care Costs and Trends endorsed the proposal. The approval by the two panels means Oregon officials can send to the federal government a waiver request that, if approved, would allow the state to implement the changes.

Under the bill (HB 2519) lawmakers approved, the current program would be split into two tiers: OHP Plus would cover individuals categorically eligible for traditional Medicaid, and OHP Standard would cover residents who became eligible after the state expanded Medicaid coverage in 1994.

Currently, the Oregon Health Plan allows enrollment by non-Medicaid eligible individuals earning up to 100 percent of the federal poverty level, or $8,860 for an individual. The bill would expand eligibility for non-Medicaid beneficiaries to 185 percent of the poverty level. According to the April 25 edition of the Kaiser Daily Health Policy Report, the plan also would require some beneficiaries to contribute co-payments for various services, such as $2 for each generic prescription and $250 per hospital admission.


Officials of TennCare, Tennessee’s troubled Medicaid program, have suspended until July 1 eligibility reverification of enrolled beneficiaries who are categorically ineligible for Medicaid, in order to shift the process from county health departments to the state Department of Human Services. The shift will create a “unified reverification process” at the state health department, which already determines eligibility for Medicaid-eligible TennCare beneficiaries as well as for residents applying for other state assistance programs.

TennCare beneficiaries are required to reverify their eligibility on an annual basis through in-person interviews. In December 2001, however, the state began “a new round” of eligibility redetermination. Under the court-approved plan, 80,000 people have been found ineligible and dropped from the program. While the verification process is suspended, the state also will have time to hire an additional 227 employees who will work on the process.


To force the state to increase Medicaid payments to nursing homes, two Texas nursing home organizations have joined a lawsuit against the state Department of Health and Human Services.

The Texas Association of Homes and Services for the Aging and the Texas Health Care Association filed a “friend of the court” briefing on January 29 that said the state is not adhering to an agreement reached in 1997 to increase Medicaid reimbursements for nursing homes.

The original lawsuit was filed by the Texas Alliance for Nursing Homes. The nursing homes say they lose $12 per day caring for Medicaid beneficiaries.


Uninsured residents would receive discounts on prescription drugs regardless of their age or income under a bill proposed by State Sen. Kim Plache (D) and Rep. Spencer Coggs (D). The measure would allow any resident not enrolled in BadgerCare, the state’s Medicaid-expansion CHIP program, or SeniorCare, a state-sponsored prescription drug program for seniors, to receive a “state-determined” discount after paying a $20 enrollment fee.

Plache said the bill, which she will formally introduce after Gov. Scott McCallum’s (R) budget amendment is passed, is “intended to give the uninsured the same bargaining clout for lower prescription drug costs” that the insured receive. Pharmacists are opposed to the plan, saying costs associated with such a discount would get passed onto them, not drug makers.

The State Legislative Update is compiled from a wide range of news sources, including the Council for Affordable Health Care (CAHI) http://www.cahi.org; the National Association of Health Underwriters (NAHU) http://nahu.org; Bizjournals at http://bizjournals.com; Stateline at http://stateline.org and Lexis/Nexis research.