Despite CMS’ assurances it is pressing forward with controversial Medicaid payment cuts unveiled in the White House budget proposal, Medicaid observers question the agency’s resolve to carry out the initiatives. Congressional and provider sources say the fact that CMS has yet to issue any regulatory proposals may signal a hesitancy to move forward as the November elections draw closer.

The nation’s governors and lawmakers on both sides of Capitol Hill have asked the White House to scrap the planned Medicaid payment cuts.

The measures were outlined in President Bush’s fiscal year 2007 budget plan, which estimated the proposals would reduce federal Medicaid expenditures by $30.4 billion over 10 years. If proposed, the three regulations would cut the state Medicaid provider tax from 6 percent to 3 percent, clarify allowable services that can be claimed as rehabilitation services and reform the program’s targeted case management system for children.

A nursing home representative says CMS Administrator Mark McClellan is getting his marching orders from the White House but is not eager to cut federal funds to states at this time. But a CMS official said the agency still intends to issue the three proposals, but said a timeframe for their release is uncertain.

Of the three proposals, the provider tax rule would save the most money -- $2.1 billion in FY 2007 -- and has the grabbed the most attention. The administration says states game the federal government by using the taxes to leverage more federal Medicaid matching funds.

“Medicaid underpays nursing homes,” a nursing home representative says. “They should be looking at Medicare overpayments rather than starting with Medicaid.”

Earlier this year CMS Medicaid director Dennis Smith caught a group of governors by surprise when he announced CMS will administratively implement the Medicaid cuts outlined in the White House’s budget proposal. Following Smith’s announcement Medicaid observers believed the proposals were a done deal, however, as the congressional elections near and the Senate has recessed until early September, stakeholders are beginning to question whether the cuts are imminent.

“The administration has shown a chink in the armor on these rules,” the nursing home provider representative says. “If they were going to come out with them, one would think that they would have already come out.”

Congress has made its support for the states clear on numerous occasions through correspondence to HHS and CMS criticizing the administration’s proposals. The most recent correspondence from lawmakers to the administration came on July 26 from House members.

Referring to the proposal to lower the provider tax, the House letter says this change “would reduce by up to half the amount of provider-paid revenues that a State could use to help finance its Medicaid program.”

Similar letters have been signed by Ranking Finance Committee Democrat Max Baucus (D-MT) and Finance members Dianne Feinstein (D-CA), Gordon Smith (R-OR) and Orrin Hatch (R-UT). The National Governors Association also opposes the payment cuts.

A state legislature representative also questions the certainty of the proposals. “Earlier in the year it was imminent, now it is in question.”

And a congressional staffer says putting the rules out before the elections is becoming a riskier proposition for the administration.

“Does anybody benefit from these before November?” the staffer asked. “As we get closer to the elections, it just doesn’t make sense. This is a successful issue for Democrats to use.”

A recent statement from the American Health Care Association (AHCA) identified the 10 states most at risk from the Medicaid cut proposals. According to AHCA, which obtained its data from the accounting firm BDO Seidman, Pennsylvania would lose $167 million in matching federal funds next year. California comes in second with $125 million in losses, followed by New York with $114.5 million and Michigan with $112.5 million.