State considers overhauling methods to fund Medicaid

JEFFERSON CITY, Mo. -- While insisting Missouri's Medicaid program is legal, Gov. Bob Holden has nonetheless offered to satisfy federal concerns by considering a change in the program's funding formula.

Federal Medicaid administrator Thomas Scully has threatened to withhold more than $1.6 billion from Missouri if it does not change its Medicaid program, which he says violates a 1991 law.

In a letter to Scully released Thursday, Holden criticized the federal government's viewpoint and defended Missouri's practice.

But he also offered a compromise.

Holden wrote that he has asked the Department of Social Services to consider the proposal of an alternative form of federal funding for the Missouri Medicaid program, one that would resolve the dispute.

At issue is a state tax on hospitals that is used to leverage more federal funding through the Medicaid program that covers health care for the poor and disabled.

Scully contends that arrangement violates federal law. The state hospitals association says it is merely taking advantage of a loophole. And the state says it has no control over what hospitals do with their money.