Alabama Medicaid Spent $1.7M for Legal Advice on Loophole

Alabama has paid a Washington, D.C., law firm more than $1.7 million since October to negotiate with CMS for more Medicaid money, the Birmingham News reports (Chandler, Birmingham News, 9/8). On Aug. 28, CMS agreed to pay Alabama $54 million in advance Medicaid payments through the end of the fiscal year. Without the money, payments to state doctors, hospitals and nursing homes could have been delayed for up to three weeks. The money comes via the Medicaid upper payment limit, commonly known as the Medicaid loophole, under which states pay local hospitals more than the actual cost of health services, receive inflated reimbursements from the federal government and require the hospitals to return the extra money to the state, which can use the funds for health- and nonhealth-related expenses. Although the waiver permitting Alabama to use the loophole expired in April, state Medicaid officials asked CMS to give the state more than $125 million in advance Medicaid payments to cover expenses for the remainder of the current fiscal year. CMS approved $66 million in costs, but denied $60.8 million. The state submitted another request for the funds on Aug. 21 (Kaiser Daily Health Policy Report, 8/30). Alabama had to pay the law firm Proskauer Rose to "assist in the dispute" because, according to Medicaid General Counsel Bill Butler, the state "did not have the resources to handle the work with staff attorneys," the News reports. Medicaid spokesperson Mary Finch said, "We have been successful and not lost any dollars. If we had not stood our ground and prepared for a legal challenge, there would have been a possibility either the whole program or a significant part of the program would have been adversely affected" (Birmingham News, 9/8).