The Obama Administration Advises States to Bilk Providers

Published February 26, 2013

Feeling constrained by the financial burden of Medicaid? The Obama administration has some advice for you: just bilk your providers!

The Obama administration said Monday that states could cut Medicaid payments to many doctors and other health care providers to hold down costs in the program, which insures 60 million low-income people and will soon cover many more under the new health care law.

The administration’s position, set forth in a federal appeals court in California, has broad national implications as it comes as the White House is trying to persuade states to expand Medicaid as part of the new law.

The statement of federal policy infuriated health care providers and advocates for low-income people. But it may encourage wavering Republican governors to go along with the expansion because it gives them a tool to help control costs.

Byron J. Gross, a lawyer at the National Health Law Program, an advocacy group for low-income people, said: “The federal government is trying to bend over backward to show flexibility and accommodate states as much as it can. California is an example of that.”

In a brief filed with the United States Court of Appeals for the Ninth Circuit, in San Francisco, federal officials defended a decision by California to cut Medicaid payments to many providers by 10 percent.

Kathleen Sebelius, the secretary of health and human services, approved the cuts in October 2011 after finding that beneficiaries would still have “adequate access” to the wide range of services covered by Medicaid…

The Obama administration said California officials had agreed to monitor beneficiaries’ access to care and to “take prompt action if any problems are indicated.”

Moreover, the administration said, Congress gave states “wide discretion” to set Medicaid rates, and courts should not second-guess decisions by Secretary Sebelius on the adequacy of rates.

“There is no general mandate under Medicaid to reimburse providers for all or substantially all of their costs,” the administration said.

This should be a warning sign for all the providers pushing for Medicaid expansions: they’re coming for you next.