City of Richmond Again Declines To Participate in Virginia’s Plan To Use the Medicaid Loophole

The Richmond City Council for the second time has refused to participate in Virginia's plan to use the Medicaid loophole, the Richmond Times-Dispatch reports. By a 5-4 vote on Dec. 11, the council "rebuke[d]" the plan, which would have brought $2.4 million to the city. Although the loophole plan was set to be finalized last week, the state had extended the deadline to allow Richmond one more chance to participate (Martz, Richmond Times-Dispatch, 12/12). Under the loophole, states pay city- or county-owned care facilities more than the actual costs of health services, receive additional matching funds from CMS and then require the facilities to return the extra state funds. States sometimes pay the facilities a small fee for participating and use the extra federal funds for both health and nonhealth programs (Kaiser Daily Health Policy Report, 10/10). CMS Administrator Tom Scully said in November that the agency this winter will end the use of the loophole for 14 states -- though not Virginia -- and will phase it out completely by 2010. Virginia Secretary of Health and Human Resources Louis Rossiter said that the decision will "have no effect" on the state's plan to use intergovernmental transfers to draw the federal funds (Kaiser Daily Health Policy Report, 11/26). In Virginia, only two localities -- the city of Petersburg and Bedford County -- have agreed to participate in the loophole plan. The localities will lend the state $500 million, which the state will "repay almost immediately and claim the payments as reimbursements for Medicaid services." The state will then receive the $259 million in federal matching funds and give the counties incentive payments totaling $6.4 million and expense reimbursements of $200,000 each (Kaiser Daily Health Policy Report, 11/26). If Richmond had participated in the plan, the state would have funneled money through the Seven Hills Health Care Center. Center officials said that Seven Hills, "with a $3 million surplus," is financially strong enough not to participate in the loophole plan. But Dr. Louis Rossiter, state secretary of health and human resources, "scolded" the Richmond panel's decision, saying, "I am appalled that some people let politics get in the way of additional resources for cash-strapped nursing homes." He added that Gov. James Gilmore (R) intends to move forward with the loophole plan (Richmond Times-Dispatch, 12/12).