MEDICAID LOOPHOLE: CBO Doubles Cost Estimates to $30B
A "loophole" used by states to inflate their federal Medicaid reimbursements will cost the program at least $30 billion over the next five years and $100 billion over the next decade, according to estimates expected to be released today by the Congressional Budget Office. The Wall Street Journal reports that the estimates coincide with an "escalating" political battle over how and when to "plug" the loophole, under which states pay local- or county-owned provider facilities more than the actual cost of services, draw down inflated matching funds from the federal government, and then require providers to return the extra state funds. Today's CBO estimates are expected to be significantly higher than July projections by the Clinton administration, which estimated the loophole would cost the federal government $12 billion over five years. The Wall Street Journal reports that the new estimates "assume more aggressive action by states to take advantage of the loophole," adding that about 28 states use the procedure or have told HCFA they plan to do so.
Lawmakers Split on Action
Although administration officials had said they would issue a regulation to close the loophole by Sept. 30, "no rule has yet been issued." But a HCFA spokesperson said he expects a rule to be issued "soon." Meanwhile, lawmakers are split between those who want the loophole "plugged promptly" and those "who argue that cutting off the extra revenues to the states would jeopardize hospitals and other facilities that rely on the money." Yesterday, several Illinois congressional delegation members and hospital officials met with top administration officials to discuss their concerns; Sen. Richard Durbin (D-Ill.) said that Illinois would lose $500 million in federal Medicaid funds if the loophole is closed, a loss that would "devastate public hospitals." However, Senate Finance Committee Chair William Roth (R-Del.) is "losing patience" with attempts to solve the problem and is preparing legislation to close the loophole based on a plan drafted by HCFA last spring. Roth said, "What is currently occurring is an obscene abuse of the program, and this abuse is being facilitated by this administration's negligence" (McGinley, Wall Street Journal, 10/3).