HHS Issues Final Rule to Close Medicaid Loophole
As required by the Medicare, Medicaid and SCHIP Benefits Improvement and Protection Act of 2000 (HR 5661), HHS on Jan. 5 finalized the rule on "upper payment limits" and Medicaid funding, closing a loophole that cost the federal government nearly $2 billion in increased Medicaid costs for fiscal year 2000 alone. Twenty-five states have "approved plans that implement programs supporting the loophole," according to a HCFA release (HCFA release, 1/5). Under the loophole, states pay city- or county-owned care facilities more than the actual cost of health services, receive additional matching funds from HCFA and then require the facilities to return the extra state funds. The state then sometimes pays the facilities a small fee for participating, and uses the funds for health and/or non-health-related items. The final regulation is based on a proposed rule announced on Oct. 5, 2000. That rule modifies Medicaid's upper payment limit rules and also allows states a certain amount of time to transition to the new rules, based on when they began using the loophole. States that used the loophole before Oct. 1, 1992, have eight years to end its use; states using the loophole after Oct. 1, 1992, but before Oct. 1, 1999, have five years; and other states with "plans that have lapsed into approval" have two years to phase out their use of the loophole. No state will have reduced Medicaid reimbursements during the 2001 budget year. Furthermore, the final rule allows a higher hospital specific limit on disproportionate share hospital payments and provides states with additional disproportionate share funds "in recognition for the higher costs that these facilities incur," according to the HCFA release. By closing the loophole, the government is expected to save about $55 billion over the next 10 years (HCFA release, 1/5). However, some states, such as Louisiana, are reportedly allowed to begin using the loophole now. In Louisiana's case, the state expects to gain as much as $1 billion dollars over the next two years. To read the Oct. 5 proposed rule to close the loophole, visit the Federal Register at http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=2000_register&docid=00-25935-filed. The final rule will be published this week in the Federal Register and will take effect in 60 days.This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.