Texas Lawmakers Fear Medicaid Fraud Allegations Could Jeopardize Reforms

Several Texas lawmakers and health advocates are trying to head off any suggestion that recent fraud allegations surrounding the state's Medicaid contractor should hinder efforts to reform the program, the Houston Chronicle reports (Hughes, Houston Chronicle, 2/28). Last week, members of the Travis County district attorney's office seized records from National Heritage Insurance Co. -- which, since 1977, has served as a payment intermediary between the state and its Medicaid providers -- and its parent company Electronic Data Systems Corp. The affidavit used to justify the search contains information that a "high-ranking executive" with NHIC "told investigators about a secret plan allegedly hatched by the company to cheat the state out of millions of dollars in fees, and if caught, to explain away those overcharges as mistakes" (Kaiser Daily Policy Report, 2/23). EDS, which allegedly made $10 million in overcharges, yesterday released a statement saying that the investigation was being "driven by political and competitive pressure associated with the state's Medicaid budget shortfall," expected to reach $1.2 billion by the end of the 2002-2003 budget cycle. The statement also said that the investigation could "distract" the state from addressing "larger" Medicaid issues (Copelin/Susswein, Austin American-Statesman, 3/1). This concern has been echoed by state Rep. Pete Gallego (D), chair of the House General Investigation Committee, which may look into the alleged overbilling. "This has just made [reform] a lot harder to do. ... I'm sure you'll hear some arguments about why do we want to put more money into a system that's broken," he said (Bahadur et al, Austin American-Statesman, 2/23). When asked whether the scandal could affect efforts to expand Medicaid to a greater number of children, Rep. Patricia Gray (D), chair of the House Public Health Committee, said, "The whispers are out there."

Not the Real Problem?
Gray has introduced a legislative package, backed by 85 House members, to reduce the number of Medicaid enrollment barriers for children, including eliminating face-to-face meetings and the state's assets test (Houston Chronicle, 2/28). "I don't think anyone in their right mind would suggest we use a scandal or a potential scandal as a way of depriving poor children of their right to health care," Senate Finance Committee Chair Rodney Ellis (D) said. Similarly, advocates lobbying for increased provider reimbursement rates note that many other states face Medicaid shortfalls and say the difficulties that Texas' program faces should not be attributed solely, if at all, to problems with NHIC. Sarah Speights, a lobbyist with Girling Health Care, said, "The Legislature might have a problem with NHIC, but they also have a problem with reimbursement rates. Texas has always been tightfisted when it came to spending on social services, but it's become too tight" (Austin American-Statesman, 2/23).

Nursing Homes Sue Over Reimbursements
In other Texas Medicaid news, a "coalition of small, mostly for-profit nursing homes" yesterday sued the state in federal court, charging that it "has reneged on a four-year-old settlement" to increase Medicaid reimbursements to cover the costs of care, thereby threatening the viability of several homes, the Austin American-Statesman reports. Kenda Dalrymple, an attorney representing the Texas Alliance for Fair Nursing Home Reimbursement, said, "Medicaid reimbursement is not enough to cover costs that a reasonable and economical provider has to incur to care for patients and meet federal standards for quality of care." While the state has proposed spending $54.8 million for nursing homes in fiscal year 2002, the group says that lawmakers would have to allocate an additional $240 million over the next two-year budget cycle in order for nursing homes to break even or $400 million to make reimbursements on par with the national average. Still, the Texas Health Care Association and the Texas Association of Homes and Services for the Aging, the state's "two major nursing home associations," decided not to join the lawsuit, saying they preferred to find a legislative solution, not a judicial one. Lt. Gov Bill Ratliff (R), while sympathetic to the problems facing nursing homes, said the lawsuit's chance of success was poor because of the "recent repeal" of the federal Boren Amendment, which required that states reimburse nursing homes enough through Medicaid to cover costs. However, Dean Davis, the lead attorney for the plaintiffs, said the 1997 agreement between the state and nursing homes was "legally binding," making the repeal irrelevant (Bahadur, Austin American-Statesman, 3/1).