Medicare Compliance & Reimbursement

Federal government still may play bigger role in states' decisions than ever before.

It was all a big mistake. That's what President Bush and Health and Human Services Secretary Tommy Thompson told the nation's governors about HHS's one-day comment period on a Jan. 7 Federal Register proposal that would require states to get their Medicaid spending plans okayed in advance by the federal government.

National Governors Association chair Dirk Kempthorne (R-ID) and vice-chair Mark Warner (D-VA) wrote Thompson Feb. 13, objecting to HHS's tactic of pushing through such a big change in federal-state relations on an emergency basis. In Feb. 20 correspondence, Thompson promised the governors that he would consult with them and open a new 60-day comment period before moving ahead with the regulation, a stance seconded by Bush himself in a Feb. 23 meeting with the governors.

Although Thompson called for a comment period, insiders say there is no evidence that HHS is backing down from its position.

But while the feds are calling the 24-hour comment period a mistake, they are not applying the same label to the substance of the proposal, which the states also dislike.  Gov. Mike Huckabee (R-AK) said he thought the administration was open not just to delaying but also revising the pre-screening requirement, but a Centers for Medicare & Medicaid Services spokesperson told MLR that the agency was moving ahead with hiring people to preview states' spending. Thompson's letter spoke only of timing and process, and Edwin Park, a senior health analyst at the liberal-leaning Center on Budget and Policy Priorities, said he saw "no backing away on substance" by the administration.

According to the Federal Register document, "CMS will begin to require the states to submit up-front documentation to support the budget and expenditures information currently captured on the CMS-37 'Medicaid Program Budget Report.' This will enable CMS to identify and resolve any potential funding and/or expenditure issues with the states prior to a budget being formulated and/or implemented and the expenditures actually paid and claimed by the states."

Proposal Aimed At State Abuses

HHS spokesperson Bill Pierce said the goal of the prescreening was to head off schemes employed by some state governments to improperly boost federal Medicaid payments using "intergovernmental transfers" and other methods. The Bush administration's fiscal year 2005 budget assumes savings of $1.5 billion over one year, and $23.5 billion over 10, through cracking down on these types of arrangements, in which money often merely shuttles among different entities but is employed to generate matching funds from the federal government as if it were truly being used to care for Medicaid patients.

The Jan. 7 proposal would expand to all the states the terms of a settlement that CMS reached with Missouri at the end of 2002, making good on then-CMS administrator's Tom Scully's stated hope that the arrangement would be a model for other states. In return for CMS's agreement not to seek return of federal payments that Missouri had allegedly obtained improperly, the state agreed in the future to "submit the source of funds used to draw down its federal match to CMS, along with its estimated expenditures for review and approval before the beginning of each fiscal year."

A state health representative said the agency has also been trying to eliminate IGT-type arrangements by imposing conditions on state applications for Medicaid waivers. There has also been speculation that, by pushing on IGTs, CMS might ultimately be aiming to reverse state opposition -- either state-by-state or en masse -- to the administration's proposed Medicaid overhaul, which would cap federal contributions to state Medicaid programs in return for giving the states more flexibility.

"If you need "x" dollars to fund your Medicaid program and they squeeze down on that," said the state health representative, "then you may be willing to say, 'O.K., we'll take a deal as long as it's got more money." This strategy appears to be working in at least one state: According to the Concord Monitor, New Hampshire has agreed to at least consider block grant-ing its Medicaid program in return for a federal agreement not to go after a couple hundred million dollars in disputed provider taxes.