Virginia County Offers $500M to Finance State’s Medicaid Loophole Plan in Its Entirety

Although Virginia's Bedford County is the only one of seven "eligible" localities that has agreed to participate in Virginia Gov. Jim Gilmore's (R) plan to collect $259 million in federal funds through the Medicaid loophole, the county's help "may be all Virginia needs," the Richmond Times-Dispatch reports (Martz, Richmond Times-Dispatch, 11/1). Under the loophole, states pay city- or county-owned care facilities more than the actual costs of health services, receive additional matching funds from the Centers for Medicare and Medicaid Services and then require the facilities to return the extra state funds. The state sometimes pay the facilities a small fee for participating, and use the extra federal funds for both health and non-health programs. In January, federal officials issued final rules to close the loophole gradually; following a 60-day delay on implementation ordered by President Bush, the regulations took effect in mid-March (Kaiser Daily Health Policy Report, 10/10). Gilmore's plan calls for seven state localities to provide the state with a total of $500 million, which would be returned to them in the form of Medicaid payments, but most localities have declined to participate (Kaiser Daily Health Policy Report, 10/25). Bedford County, which has said it is "willing and able" to loan all $500 million to the state, so far has authorized a loan of up to $76 million. An administrator added that the county can increase the amount to "whatever the state needs." Although the administration will not say so "openly," it believes that only one locality's participation in the plan is necessary to "draw down the federal money," the Times-Dispatch reports.

Rejecting the Plan
Other localities have opposed the plan because of "ethical concerns" about "exploiting" the loophole. Roderic Slayton, chair of the Orange County, Va., Board of Supervisors, said, "The problem is what we have to sign and what we have to certify the money is being used for, and we know the money is not going to be used for that." The Orange County board has not formally considered the plan and will not discuss it until Nov. 13, two days prior to the state deadline for local action. Dr. Louis Rossiter, state secretary of health and human resources, said he believes most of the localities' opposition is "political" and "based on the budget standoff between Gilmore and the General Assembly." Rossiter added that he expects all seven eligible localities to participate in the loophole, even though two have already said no, a third has "shunned the money without any formal action" and two more are "leaning against the deal." One additional locality, Petersburg, appears to be "leaning toward participating" (Richmond Times-Dispatch, 11/1). For further information on state health policy in Virginia, visit State Health Facts Online.