A bipartisan group of federal policymakers has vowed to block any plans the Bush administration might have to close the so-called “upper payment limit” loophole in the Medicaid state reimbursement formula.
According to CongressDaily/AM Reports, Members of Congress from both chambers and both parties are “vowing to block or at least delay” a proposed rule phasing out a Medicaid loophole. A similar battle took place during the Clinton administration’s tenure, when Congress successfully “watered down” a proposal to curtail the states’ use of the “upper payment limit.”
Medicaid currently permits state budget officials to reimburse health care providers several times more than the standard Medicare rate for services provided to Medicaid patients. The Medicaid reimbursement formula might permit state officials, for example, to request federal matching funds of 200 percent the Medicare rate for an x-ray or other lab work.
Once they’ve received the federal matching funds, state budget officials can “share” the inflated reimbursement with the care providers, sending them perhaps 135 percent of the standard Medicare rate for the x-ray. What they don’t turn over to the care providers can be used for any budgetary purpose, from fixing potholes to increasing salaries for state employees. There is no law or regulation requiring the funds be used only for health care-related services.
The Clinton administration sought to reduce the upper payment limit to 150 percent of the rate a service would be reimbursed under Medicare.
But Tom Scully, administrator of the Center for Medicare and Medicaid Services (CMS), said CMS will seek to reduce the upper payment limit to 100 percent, effectively closing the loophole. He said the 150 percent level was “well-meaning, but it’s turned out to be a hole you can drive a truck through.”
Protecting Their Turf
Many lawmakers say closing the loophole would hurt state and community services like free medical clinics and public hospital systems. States that have used the over-payment of funds to pay for health services would see their federal funding greatly reduced.
“I’ve got hospitals out there that if they are taken back to 100 percent, they fold,” said Senator Blanche Lincoln (D-Arkansas), who has introduced language in the Senate’s version of the economic stimulus bill to delay for six months implementation of the proposed rule.
CongressDaily/AM also reports the rule has particularly upset lawmakers from California, which uses loophole funds to subsidize the state’s emergency and trauma care system. “This longstanding program is a cornerstone of financial support for the state’s health care safety net, and all federal Medicaid dollars are used exclusively for health care purposes,” 47 members of the California House delegation wrote in a letter to House leaders. “Therefore, any steps taken to rightfully eliminate abuses of the Medicaid program under [the loophole] should not undermine California’s program.”
Scully says the plan to close the loophole will go forward. “If Congress wants to change it, they’re going to have to finance it.”