Changes to Medicaid considered

Monday, February 11, 2002

Missouri officials apparently are considering changing the state's health insurance program for the poor, perhaps in exchange for the U.S. government's dropping its claim for $1.6 billion it says the state improperly collected from federal coffers.

While negotiations continue, Missouri also would get a broad waiver from certain federal regulations that dictate how states run their programs, the St. Louis Post-Dispatch reported Sunday.

Missouri, which gets reimbursed from the federal government for about 61 cents of every dollar it spends to treat its Medicaid patients, under the proposal would get a set payment for each patient in the program, no matter what his or her health care needs.

Missouri then would have to manage the care for the state's Medicaid patients and stay within the federal cap and the state's regular contribution. If the costs exceeded that combined budget, which last year was about $4 billion, the state would have to pick up all the extra expenses.

"It's a big change in the way the money works," said Greg Vadner, who as head of Missouri's Division of Medical Services has also been involved in the negotiations.

Regardless, state officials say that Missouri won't get less money than the $2.7 billion it got last year, though whether it would get less in the future is unclear.

Vadner said the discussions still were at a "conceptual" stage and that a deal was far from being finalized.

Worry about service cuts

Still, some Missouri health-care advocates worry the new plan could force the state to slice services to the state's most needy people -- or to dip into its shrinking revenue to cover new costs.

"Potentially thousands of Medicaid beneficiaries would be affected by this" if it goes through, said Joe Squillace, a Citizens for Missouri's Children health policy analyst.

For about a decade now, hospitals pay the state a special tax based on their net revenues from patients, insurers and the government-funded Medicaid and Medicare programs. The state then spends that money on health care, triggering more federal Medicaid funds. For every $1 of state money, the federal government kicks in another $1.50. And much of that money goes right back to hospitals.

While many states do the same thing, Missouri's approach differs in that hospitals, through private collaboration, redistribute the money they get from the state. Those that got more give to those that got less, so by sharing the wealth all end up with about the same amount they had paid in taxes.

A federal audit has said that arrangement is illegal under a 1991 U.S. law. Thomas Scully, the federal Medicaid program's administrator, has threatened to withhold more than $1.6 billion from the state.

Rather than violating the law, Missouri hospital officials say they are taking full advantage of it.

Paid voluntarily

Missouri's arrangement dates to 1991. Hospitals voluntarily paid the state so that Missouri could increase its federal Medicaid funds. But the federal government soon banned such donation programs, so the state made it a mandatory tax in 1992.

The state also changed the program in 1998 at the U.S. government's prompting.

Until then, the state paid each hospital's share of money into a general fund managed by a Missouri Hospital Association subsidiary. The rule change requires payments to go to individual hospitals, which in turn are putting the money into the common fund.

Last fiscal year, hospitals paid 5.5 percent of their net revenues in state taxes, generating $398 million for the state. That triggered an additional $624 million in federal Medicaid funds, meaning the tax resulted in a total of $1 billion -- a little more than one-fourth of Missouri's total Medicaid budget.

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