HHS Approves Florida Medicaid Changes, including UPL Funds

HHS Secretary Tommy Thompson announced April 5 the approval of three Medicaid changes for Florida and said that the department will "work with state officials" in the next few weeks to "resolve other pending requests" (HHS release, 4/5). Florida lawmakers applauded the approval, saying the waivers will provide the state with an additional $159 million in federal matching funds and will decrease the need to make further budget cuts in health programs, the South Florida Sun-Sentinel reports (South Florida Sun-Sentinel, 4/6). Under the approved changes, HHS will give Florida $15 million for Medicaid payments to assisted living facilities, adult family care homes and residential treatment facilities. According to the state, "This will provide a 17% increase in facility rates and affect nearly 9,500 persons." Florida has also been granted a waiver to allow Medicaid beneficiaries with diabetes in pilot areas to receive prescribed medications and related supplies through mail order distribution (HHS release, 4/5). This request will save the state almost $900,000 (Office of the Governor release, 4/5). Thompson said the actions "make good on President Bush's promise to build a stronger partnership with states and to provide a faster response from the federal government" (HHS release, 4/5).

Using the Loophole
The bulk of the funds ($143 million) will go to Florida through the upper payment mechanism (sometimes called the Medicaid loophole) (State of Florida Press Office release, 4/6). Under the loophole, states pay city- or county-owned care facilities more than the actual cost of health services, receive additional matching funds from HCFA and then require the facilities to return a portion the extra state funds. The state then sometimes pays the facilities a small fee for participating, and uses the extra federal funds for health and/or non-health-related items (Kaiser Daily Health Policy Report, 1/8). Calling the funds "special Medicaid payments," HHS indicated that the dollars will be used to help hospitals that provide the majority of care to underserved populations (HHS release, 4/5). The Medicaid loophole has been the subject of congressional hearings and criticism from observers, with legislators taking steps to end the practice within the next few years. A plan agreed to last year by Congress and the Clinton administration dictated that no new states may take advantage of the loophole after mid-March 2001, and that those that have been using it be "weaned off the payments." Since September 2000, however, at least six new states have started using the loophole, and the Bush administration is "likely" to approve similar applications from several other states with applications that have been pending at HHS since before mid-March, according to the Washington Post (Kaiser Daily Health Policy Report, 3/30). Florida requested to use the loophole in September 2000 (Office of the Governor release, 4/5). The Bush administration also recently granted Wisconsin permission to use the loophole earlier this year, a move that will give that state an additional $258 million in federal funds. Under the current rules, Wisconsin will receive two additional similar transactions that will put a total of $604 in federal money in the state's coffers by mid-2003 (Kaiser Daily Health Policy Report, 3/5).

Helpful Timing
The additional funds come as Florida lawmakers have put hundreds of health care programs on the "chopping block." Gov. Jeb Bush's (R) proposed budget sets aside $25 million for "projects he and lawmakers will agree are the most worthy" and calls for $313 million in tax cuts. In February, the state Senate Appropriations health and human services subcommittee spent two days trimming programs and "reluctantly" endorsed some of Bush's cutback ideas. The recommended cuts include:

• $115 million from the Medically Needy program, which reimburses hospitals for caring for uninsured families with high medical bills who would not qualify for Medicaid in absence of those bills;
• $11.2 million from a juveniles' drug treatment program;
• $15 million from 53 community programs that assist foster, abused or autistic children, drug and alcohol abusers, the mentally ill and teenage mothers; and
• $37 million from a medical assistance program for "poor" uninsured pregnant women (Kaiser Health Policy Daily Report, 2/20).