State Medicaid Officials Deny HHS Allegations of Improper Accounting Practices
Medicaid officials from states identified by HHS as using improper accounting techniques to boost federal funding "defended their practices, saying that in some cases federal officials had explicitly approved the arrangements," also adding that they have "repeatedly asked the federal government to clarify the rules," the New York Times reports. Fifteen states were named on the list for "recycling" federal funds.
Bush administration officials have said that under such arrangements, states typically make "an inflated payment to a county or municipal hospital or nursing home, far exceeding the cost of care for a Medicaid patient," according to the Times. The county or city returns a large portion of the money to the state, which then uses it to acquire more federal matching Medicaid funds or to pay for other state programs (Pear, New York Times, 4/12).
HHS Secretary Mike Leavitt in February said that the federal government could save $60 billion in Medicaid spending by pursuing several strategies, including prohibiting what he called the "accounting gimmicks" used by states to boost federal matching funds. The Government Accountability Office in January reported that such accounting tactics "cost the federal government several billions of dollars each year" (California Healthline, 4/11).
Kathryn Allen, director of Medicaid issues for GAO, said, "By using complex, creative financing schemes, states have inappropriately increased the federal share of Medicaid expenditures." Administration officials said the accounting arrangements will cost the federal government $5.8 billion in the next five years and more than $15 billion over 10 years.
The 15 states on the list -- which the Bush administration provided to Congress on the condition that it not be disclosed -- were Alabama, Alaska, California, Georgia, Idaho, Illinois, Iowa, Massachusetts, Minnesota, Mississippi, North Carolina, North Dakota, Tennessee, Virginia and Washington (New York Times, 4/12).
States listed as having agreed to revise at least some of their accounting practices were Alabama, Arkansas, Kansas, Kentucky, Louisiana, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nebraska, New Hampshire, New York, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Washington and Wisconsin (American Health Line, 4/11). The list was obtained from health care lobbyists and CMS, according to the Times.
James Stevenson, a spokesperson for Washington's Medicaid program, said the state regularly transferred money to public hospital districts, which returned some funds to the state. "It was not a gimmick," he said, adding, "It was done in the open, with the knowledge of federal Medicaid officials."
Mark Trail, director of the Georgia Medicaid program, said, "County hospitals send us local public funds, we match it with federal Medicaid funds and send it back to the local hospitals. That's not recycling."
Illinois Medicaid Director Anne Marie Murphy said Cook County's $1 billion contribution to the state's Medicaid expenses was allowed under a provision of the federal Medicaid law of 2000, with support from House Speaker Dennis Hastert (R-Ill.).
California Medicaid Director Stan Rosenstein said, "We think our payments are legitimate."
Manju Ganeriwala, chief financial officer for the Virginia Medicaid program, said the state's arrangement was legal. However, Virginia Gov. Mark Warner (D) -- who as chair of the National Governors Association is negotiating with the administration about changes to Medicaid -- agreed to stop using the tactics because he "believes that states need to come to the table with clean hands when they discuss Medicaid reform," Ganeriwala said.
Matt Salo, director of health legislation for NGA, said, "There are no regulations or guidelines. If there are going to be new rules, tell us what they are and we'll live by them."
CMS Administrator Mark McClellan said in an interview that states are free to require counties to fund Medicaid, but the money should stay with the health care provider and not be returned to the state for federal matching funds. McClellan said, "We want to be sure that Medicaid dollars go as far as possible, that they are actually used to provide health care to needy people."
Dennis Smith, director of the Center for Medicaid and State Operations, said the federal government had "some knowledge of these [accounting] arrangements in prior years." Federal officials "said the disagreements would probably be resolved through negotiations with each state," the Times reports.
Senate Finance Committee Chair Chuck Grassley (R-Iowa) said recently that federal officials "should issue a clear policy so we can be sure that state A is not being treated any different from state B."
Sen. Max Baucus (D-Mont.) said that for more than a year he had been asking the administration to explain its "new policy" restricting the financing arrangements (New York Times, 4/12).