Budget bill gives states what they wanted on Medicaid, but they lose out on DSH
Budget bill / Medicaid / DSH
August 31, 1997
4 minutes read
As Congress completed its work on the budget, state officials found lots to celebrate, both at meetings of the National Governors Association late last month in Las Vegas and at the National Conference of State Legislatures (NCSL) in Philadelphia in early August. In addition to the billions of dollars in new federal money for children’s health insurance, the states have been given new freedom to enroll Medicaid beneficiaries in mandatory managed care. With the exceptions of dual eligibles and children with special needs, states will now be able to require most beneficiaries to enroll in managed care without applying for federal 1915(b) waivers.
It was desire for greater flexibility and frustration with the Washington bureaucracy that fired up the governors last year in their unsuccessful campaign for Medicaid block grants.
Many governors also took particular pleasure in the elimination of the Boren Amendment, which requires states to reimburse hospitals and nursing homes at "reasonable and adequate rates" for Medicaid services. State officials say the law has made it difficult to control spending on institutional care. "We got a clear, across-the-board, no-transition repeal," says Joy Johnson Wilson, NCSL’s federal policy counsel.
States will now be required only to give providers and beneficiaries "a reasonable opportunity for review and comment" on the proposed reimbursement rates set by the state.
Cost-based reimbursement for federally qualified health centers and rural health clinics, instituted in 1990, will be eliminated as well, but over a six-year period. "It gives us time to make a transition," says Dan Hawkins, policy director for the National Association of Community Health Centers, who notes that the health centers’ patient mix is 80% Medicaid and uninsured and 20% commercial—the inverse of the typical private physician’s practice.
A loss on DSH
The states did lose out on one important issue—disproportionate share (DSH) payments to hospitals that serve an exceptionally large number of low-income and uninsured children. According to the Congressional Budget Office, the funding changes will mean $10.4 billion in Medicaid savings over five years.
The budget agreement puts a flat cap on the amount of DSH funds a state can receive. However, negotiators put a 3.5% limit on cuts to 13 states with high DSH payments. Additional compensation will be provided for Texas, South Carolina, New Jersey and Missouri. Specific state reductions were published in the bill without a formula.
"They used a blend of things to get to the right numbers to get the votes needed for reconciliation," says Ms. Wilson.
Payments to Institutions for Mental Diseases are limited to 50% of total DSH spending in 2001, 40% in 2002 and 33% after 2002.
T he National Association of Children’s Hospitals (NACH) and others wanted states to be required to target money to hospitals that treat the highest number of Medicaid and uninsured patients. While states must devise a mechanism to give top priority to such hospitals, particularly children’s hospitals, t he law does not tell states how to do this, says Peters Willson, vice president, public policy, for NACH.
Some states are already taking DSH payments out of Medicaid capitation rates paid to HMOs. Mr. Willson says one "extremely important" provision in the law requires states to do that, ensuring that DSH payments go to hospitals.
There was widespread concern that states might use some of the new money for children’s insurance to compensate for cuts in DSH funds but Mr. Willson says the law makes it clear that this would not be a proper use of the funds.
Immigrants
Congress agreed to restore Supplemental Security Income (SSI) benefits to more than 350,000 immigrants, one of the most controversial changes under last year’s welfare reform law. The estimated cost over five years is $11.4 billion.
SSI benefits are retained for immigrants lawfully residing in the country, who were receiving benefits on August 22, 1996. Also eligible for benefits are immigrants lawfully residing in the U.S. at the time of enactment who are, or become, disabled.
Cuban-Haitian entrants have been added to refugees and asylees as the class of people exempted from the SSI and Medicaid bars. Their period of exemption has been increased from five to seven years.
The bill also includes a total of $100 million in authorized payments for fiscal 1998-2001 for 12 states with the highest number of undocumented aliens, based on October 1992 data. The states are: Arizona, California, Colorado, Florida, Illinois, Maryland, Massachusetts, New Jersey, New York, Texas, Virginia, and Washington.
Alaska, the District of Columbia, Puerto Rico, and the territories have particular reason to be pleased with a provision in the new law that increases their federal Medicaid contribution.
The District of Columbia’s federal matching rate will be increased permanently from 50% to 70% beginning in fiscal 1998, Alaska’s matching rate will increase from 50% to 59.8% for fiscal years 1998-2000 and Puerto Rico and the territories will receive an inflation adjustment.
Budget bill gives states what they wanted on Medicaid, but they lose out on DSH
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