HHS Grants New York, Florida Permission To Use Medicaid Loophole
HHS has granted permission for New York and Florida to receive additional funding through the Medicaid loophole Newsday reports (Yan, Newsday, 2/28). Under federal Medicaid rules, states can pay public hospitals up to 150% of the Medicare rate for certain services, drawing down extra federal matching funds in doing so. The Bush administration says that public hospitals often "kick back" the extra federal money to the states, which can use it for services not related to health care. In an attempt to reduce Medicaid spending, the administration is seeking to reduce Medicaid's upper payment limit to 100% of the Medicare rate, and HHS officials in January published a regulation that would make such changes effective March 19 (Kaiser Daily Health Policy Report, 2/4). Under the regulations, states with "long-established" use of the loophole would have five to eight years to reduce their payments to 100%, and states with "newer programs" would have one to two years. The administration plans to fully phase out the loophole by 2010 (Kaiser Daily Health Policy Report, 1/18). According to Rob Sweezy, a spokesperson for CMS, New York's request to use the loophole was approved because it was filed prior to November, when the Bush administration announced the closing of the loophole (Newsday, 2/26). The
New York Times reports that New York will receive an additional $508 million in federal payments by reimbursing hospitals at the 150% level for services provided between August 2001 and March 2002. Aides to Gov. George Pataki (R) said approximately $96 million will go to local governments, "primarily New York City." The remainder of the funds will go to the state for "a variety of health care initiatives"(Hernandez, New York Times, 2/28). Through Florida's use of the loophole, 75 hospitals in the state will receive more than $200 million in extra funds, the South Florida Sun-Sentinel reports (Lytle, South Florida Sun-Sentinel, 2/26).
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