Medicare Compliance & Reimbursement

The tax bill passed by the Senate May 15 includes $20 billion in fiscal relief for state and local governments, including $10 billion earmarked for Medicaid. The measure would also raise Medicare reimbursements for rural states.

The Senate approved the $350 billion package 51-49, and the measure must now be reconciled with the $550 billion House version, which does not contain the state aid or rural reimbursement provisions.

Senators voted 95 to 3 in favor of an amendment by Sen. Susan Collins (R-ME), funnelling $10 billion to state Medicaid programs in the form of a temporary increase in the Federal Medical Assistance Percentage, the rate at which the federal government matches state Medicaid spending, for the last two quarters of fiscal year 2003 and the first three quarters of FY 2004. The FMAP, which varies by state, would go up by 2.95 percentage points for each state during that period.

The other $10 billion, in the form of grants that could be used for a broad array of purposes, would be split, 60 percent for states and 40 percent for local governments. Republicans turned back a Democratic effort to add an additional $20 billion for states.

Help for rural states came in the form of an amendment, adopted 86-12, offered by Finance Committee Chair Charles Grassley (R-IA). The amendment would channel additional funding to an array of rural providers. Among other things, the amendment would permanently equalize the payment base for rural and urban hospitals, increase assistance for low-volume hospitals, and remove the cap on "disproportionate share hospital" payments for rural hospitals.

Grassley said his amendment is "mostly paid for" by reducing the prices Medicare pays for currently covered prescription drugs, slowing spending for durable medical equipment, and adding copayments for laboratory services. However, prescription drug and DME reimbursement have each tied Congress in knots over the years, and House leaders like Ways and Means Chair Bill Thomas (R-CA) have sought to use the same offsets to reduce the cost of a Medicare prescription-drug benefit.