Missouri May Move to ‘Per-Patient’ System to Determine Federal Funding for Medicaid Program

Missouri health officials, under pressure from the federal government, are considering a "controversial" new system that would alter the way the state receives federal funds for its Medicaid program, the St. Louis Post-Dispatch reports. Under the proposed system, Missouri's Medicaid program would receive a set amount of funds per beneficiary, "no matter what his or her health care needs," rather than reimbursements for services that the state covers under the program. Missouri currently receives about 61 cents from the federal government for each dollar it spends on the program. If the new per-beneficiary system is adopted, the state would have to "manage the care" for beneficiaries to "stay within the federal cap and the state's regular contribution" to the program. The state would be responsible for costs that go beyond that amount. Under the new system, Missouri would receive no less than the $2.7 billion in federal funds that the state received last year, state health officials said. However, in the future, the state could receive less than it would have under the current system, the Post-Dispatch reports. Greg Vadner, director of Missouri's Division of Medical Services, said that state and the federal government "were far from reaching a final deal" on the proposal.

Tax Controversy
The proposed funding change came as the result of negotiations among Missouri and federal health officials after CMS Administrator Tom Scully in December threatened to withhold from the state millions of dollars in federal matching funds (Shesgreen, St. Louis Post-Dispatch, 2/10). In a letter to Missouri health officials, Scully said that a federal audit found Missouri had "improperly reaped" more than $1.6 billion in federal Medicaid funds through a tax on hospitals and nursing homes that partly funds Medicaid. The CMS audit said that because the system redistributes the tax revenue to the health facilities and guarantees the facilities will get back what they had paid, it violates a 1991 law. The audit maintains that "the full burden of the tax falls" on the federal government, which matches the revenue raised through the tax (Kaiser Daily Health Policy Report, 12/5/01). If Missouri adopts the new Medicaid funding system, the federal government would "drop its claim for the $1.6 billion in disputed funds," the Post-Dispatch reports.

Advocate Concerns
If Missouri officials adopt the new funding system, the state might have to scale back services for low-income residents or "dip into its shrinking revenue to cover new costs," health care advocates said. Further, advocates warned that a cap on federal funds for Medicaid could "further discourage" doctors from accepting new Medicaid beneficiaries and "leave Missouri holding the bag for any steep jumps" in Medicaid costs in the future. Some health advocates also said that the federal government "wants to test a per-patient formula in Missouri in the hopes that other states will follow." But state health officials maintain that they will not "broker a deal that could endanger health care for Missouri's poor," adding that the state has "no intention of cutting services" for Medicaid beneficiaries (St. Louis Post-Dispatch, 2/10).