Proposed HHS Rule Shortens ‘Phaseout’ of Medicaid Loophole
HHS proposed a rule yesterday that would close the Medicaid loophole after one more year instead of two for states that began using the "accounting gimmick" after October 1999. The AP/Washington Post reports that it is "not clear" how many states will be affected by the "shortened phaseout." Since September, at least six new states have started using the loophole and five other states have applications that will "likely" be approved. A plan approved last year by Congress and the Clinton administration dictated that no new states may take advantage of the loophole after this month, and that those that have been using it be "weaned off the payments." 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 extra funds for both health and non-health-related expenses. When the Bush administration released its budget last month, President Bush said that closing the loophole will save Medicaid $17 billion over 10 years (AP/Washington Post, 3/30).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.