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Volume 13 Number 65
ISSN 1091-4021
Friday, April 4, 2008

By Sarah Barr

News: Medicaid

Most witnesses testifying before a House panel April 3 voiced support for legislation that would place a moratorium on seven controversial Medicaid rules, saying the regulations would result in cuts to vital services for beneficiaries.

The Centers for Medicare & Medicaid Services contends that the regulations are needed to eliminate waste and fraud within the system and that the moratorium would not only delay the needed reforms but potentially prevent CMS from issuing further guidance about how states should implement the rules.

"The administration's argument for supporting these regulations does not hold water," Rep. John Dingell (D-Mich.), said at the House Energy and Commerce Health Subcommittee hearing. "These regulations go well beyond any justifiable point to curb any abuses in the system and instead would shift costs to the states and prohibit support for legitimate expenditures."

Dingell, chairman of the House Energy and Commerce Committee, and Rep. Timothy Murphy (R-Pa.) introduced a bill (H.R. 5613) March 14 that would extend or enact moratoriums on the regulations until April 1, 2009. Existing moratoriums on four of the regulations expire in May and June of 2008.

The proposed Protecting the Medicaid Safety Net Act of 2008 would apply to recently issued rules that would reduce or prohibit Medicaid reimbursements for public and teaching hospitals; narrow Medicaid coverage for outpatient hospital services, rehabilitation services, school-based administrative and transportation services, and case management services; and restrict how states raise funds for Medicaid (No. 51 HCDR 03/17/08 a0b6e9e1j8).

Rules Undermine Safety Net, Witnesses Say

Witnesses at the hearing told members of the panel, most of whom also spoke in favor of the moratorium bill, that the CMS rules would limit the ability of states to provide needed services to vulnerable populations, with many highlighting the effects of the changes on children. Under the rules, school-based administrative and transportation services would no longer qualify for federal payments.

"We're the adults. We're the ones who have to protect these children," Dr. Marsha Raulerson, a pediatrician, said on behalf of the American Academy of Pediatrics.

Witnesses also testified about the effect they believe the rules would have on hospitals and other providers. Hospitals are particularly concerned about the effect of a rule that would narrow the definition of a public provider and limit the use of intergovermental transfers to provide funding for Medicaid (No. 48 HCDR 03/12/08 a0b6e3y7z4).

However, Dennis Smith, CMS's director of the center for Medicaid and state operations, told the panel the rules are need to curb abuse of the system and ensure states are fulfilling their funding obligations. CMS is concerned that some states are manipulating the system, sometimes with the advice of outside consultants, to increase the flow of Medicaid funds from Washington.

"If the state isn't putting up its share of the funding, you're eroding the foundation of the Medicaid program," Smith said, noting that the Government Accountability Office and the Health and Human Services Department's Office of the Inspector General have documented instances in which states for years have unfairly inflated their federal payments or otherwise not adhered to Medicaid rules.

GAO Data on Methods of Inflating Federal Payments

James Cosgrove, acting director of health care for the Government Accountability Office, told the panel that GAO has documented methods used by the states to inflate their federal payments for more than a decade.

"We have found government oversight is still needed," he said.

When asked by Dingell about whether GAO had examined the particular areas the rules seek to change, however, Cosgrove replied that it had not.

"Our work over time has called for more guidance, but no, we don't have any specific recommendations on these," he said.

Dingell replied that, while eliminating waste and fraud in the system is important, it would require specific recommendations to target areas where abuse exists.

Waste, Abuse Problems 'Already Solved.'

Barbara Coulter Edwards, interim director of the National Association of State Medicaid Directors, said that the states believe CMS has already solved many of the problems surrounding states' claims for federal reimbursement.

"We have not asked CMS to walk away from these issues," she told the panel, adding that CMS has now gone too far, while also failing to give states adequate guidance or realistic time frames in which to implement the proposed rules.

States are already feeling the effects of that failure with regard to the targeted case management rule, which went into effect April 3, she said. While CMS has begun to respond to requests for guidance, little is concrete.

In addition, if some of the other rules take effect, "systems will be broken immediately and there will not be alternative strategies yet in place," Edwards said. "It takes time, it takes legislative action at the state level, it takes alternative funding strategies; those don't exist."

Moratoriums Seen Delaying Additional Guidance

Smith told BNA that, if and when the regulations go forward, CMS would provide additional information but that the moratoriums prevent them from beginning that process.

"We recognize that additional guidance is needed and states need to train on that, et cetera," he said. "Which is why, again, we think it's so important to not simply put another moratorium on it because that doesn't get us any closer."

Edwards said in her testimony that the moratorium would allow for further discussion of how to craft rules that provide clarification and eliminate waste without dismantling the Medicaid safety net.

Murphy also noted that if legislation extending the moratoriums takes effect, Congress will have to find a way to offset the cost of not going forward with rules.

Senate Bill

In the Senate, meanwhile, Sens. Jay Rockefeller (D-W.Va.), Olympia Snowe (R-Maine) and Edward Kennedy (D-Mass.) April 3 introduced legislation that would impose a moratorium on the CMS regulations until April 1, 2009, as well.

The Economic Recovery in Health Care Act of 2008 would also delay a December 2007 proposed rule that allows the HHS secretary to overturn or remand decisions of the departmental appeals board, and implementation of guidance issued in August 2007 by CMS that affects eligibility requirements for the State Children's Health Insurance Program, according to a statement from the senators (No. 19 HCDR, 01/30/08 a0b5t9a9g6).

"This is the wrong time to impose regulations that will shift additional financial burdens to states that cannot afford it," Snowe said in a statement. "Rather than identifying the ways in which we can work more efficiently and better serve those who rely on Medicaid, our states are faced with the prospect of being forced to implement regulations that will cause them to fall through the cracks."

The bill also would provide $12 billion in funding to the states, with $6 billion in additional Medicaid assistance and $6 billion in general revenue-sharing grants. Each state must meet certain criteria in order to qualify for the relief payments.

More information about the hearing is available.