MEDICAID LOOPHOLE: Regulations Proposed to End Practice
The Clinton administration yesterday proposed regulations to gradually close a Medicaid loophole that has allowed 20 states to "reap billions of excess federal dollars" from the government program, the Philadelphia Inquirer reports. The loophole is a technique used by states in which they bill the federal government for the maximum cost of services provided by a local- or county-owned health nursing homes and hospitals but negotiate lower rates with the facilities. The states then pocket the extra money, which they sometimes choose to spend on health-related services, but other times use for non-medical and unrelated projects such as reducing state debt. The loophole cost the federal government nearly $2 billion in FY 2000. "However well-intentioned some states may have been, the practice today clearly constitutes an abuse of the Medicaid system," HHS Secretary Donna Shalala said. Under the proposed regulations, the extra payments would "phase out" over the next five years. "We recognize that states will need time to adjust to these changes," Michael Hash, acting administrator of HCFA, said. Federal officials would continue a higher level of reimbursement for public hospitals, which often serve "considerably more lower- income patients." In addition, the administration said it would support legislation to increase Medicaid payments to public and private hospitals by $10 billion over 10 years (Carter, AP/Philadelphia Inquirer, 10/6).
Do the Regs Go Far Enough?
Senate Finance Committee Chair William Roth (R-Del.), who has pushed for months to close the loophole, believes the Clinton administration is "stepping backward" and "sanctioning abuse" in its efforts to gradually end the practice. "The regulation permits the scam to continue while only modestly attempting to contain its magnitude," Roth said. Roth and other critics of the practice say that the loophole will cost taxpayers $127 million over the next 10 years if the government does not move to close it (Pound, USA Today, 10/6). States and health care providers have 30 days to comment on the regulations, after which time a final regulation will be published (Carter, AP/Philadelphia Inquirer, 10/6).