States Oppose Proposed Medicaid Rules

The Bush administration faces "growing opposition" from state officials, members of Congress, hospitals and nursing homes over proposed rules that would reduce Medicaid reimbursements to public hospitals and nursing homes to save the federal government an estimated $12.2 billion over five years, the New York Times reports.

The rules -- part of the fiscal year 2007 budget proposed by President Bush -- would reduce from 6% to 3% the allowable rate that states can tax hospitals and nursing homes. Two-thirds of states currently impose such taxes (Pear, New York Times, 8/13).

States impose such taxes to increase the amount of Medicaid matching funds provided by the federal government and offset the cost of the taxes for hospitals and nursing homes through higher reimbursements (California Healthline, 7/3). In addition, the rules would limit Medicaid reimbursements for hospitals and nursing homes to the "actual cost of services."

According to the Bush administration, states have used a number of improper accounting practices to increase the amount of Medicaid matching funds provided by the federal government.

HHS Secretary Mike Leavitt said that the rules would "remove incentives for states to shift the responsibly to fund their share of the Medicaid program to health care providers."

According to the Times, Democratic and Republican governors and other opponents of the rules maintain that Bush "is doing by regulation what he unsuccessfully asked Congress to do by legislation in the last two years." In addition, opponents said that "prior administrations and the Bush administration itself approved many of the state taxes that would be deemed improper under the new rules," the Times reports.

The National Governors Association said that the rules "would impose a huge financial burden on states."

California Gov. Arnold Schwarzenegger (R) said, "The administration is attempting to reverse decades of federal Medicaid policy through the regulatory process" after "Congress rejected these misguided cuts."

Missouri Gov. Matt Blunt (R) said that the rules would "jeopardize the continuity of care for Medicaid recipients" and "could mean a loss of more than $84.9 million" for Missouri.

Kansas Gov. Kathleen Sebelius (D) said that the rules would limit the ability of hospitals to serve Medicaid beneficiaries and uninsured patients.

The American Hospital Association and the American Health Care Association, which represents nursing homes, also oppose the rules. Thomas Nickels, senior vice president of AHA, said, "If provider taxes are cut, the Medicaid program will be reduced, and that will harm beneficiaries," adding, "We do not see a political will, at the federal or state level, to supplant provider taxes with other types of revenue" (New York Times, 8/13).