State Medicaid directors say regulatory changes proposed by the administration for Medicaid policy will be much larger than predicted, and a new report blasts the administration for its approach to those changes.
A report issued last week by the Committee on Oversight and Government Reform for the U.S. House of Representatives came as the end result of a November 2007 hearing on regulations issued by the Centers for Medicare & Medicaid Services. The report was prepared at the request of Rep. Henry Waxman (D-Calif.), who chairs the committee.
The report finds that seven regulations proposed by the CMS would reduce federal payments to states by $49.7 billion over the next five years - more than three times the original $15 billion estimate made by the Office of Management and Budget.
Two regulations would reduce Medicaid reimbursements for services furnished by public hospitals and teaching hospitals. Another would restrict how states can raise revenues from the healthcare sector to fund their share of Medicaid. The other regulations narrow the scope of allowable Medicaid coverage for various services.
The report's authors said they received responses from 43 state Medicaid directors, accounting for approximately 95 percent of total Medicaid spending.
In one state's case, the estimate of lost federal funds is more than 10 times the estimate suggested by the administration. The largest hit would be felt in California, which is expected to lose $10.8 billion under the new rules.
Cost limits on public providers are estimated to have the largest impact, with the reduction estimated to total $21.1 billion over the five years.
The Medicaid director from Missouri, quoted in the report, said the effects are even more severe when coupled with the corresponding loss of state funding. "Such a loss of funding would cause significant cash-flow shortages, causing a financial strain on Missouri hospitals," the director said.
The report also contends that the regulations will reduce federal spending by shifting costs, not by achieving greater efficiencies, and will "disrupt existing systems of care for fragile populations."
From providers' standpoint, the regulations threaten the financial stability of hospitals and clinics that treat the uninsured, will impose significant administrative burdens and costs on state Medicaid programs and aren't supported by the state Medicaid directors, particularly because their systems aren't be given enough time to make adjustments to the new rules.
The report criticized the CMS for handing down the regulations without allowing for Congressional oversight.
"In general, the seven regulations at issue represent unilateral action by CMS neither directed nor authorized by Congress," the report said.
Estimates of the financial impact given by CMS last November "were national in scope (and) do not enable members of Congress or the public to assess the effect of the regulations on their own states," the report continued. "The lack of state-specific estimates represents a major failure of transparency."
The study suggests the "regulations will have a much larger fiscal and programmatic impact on state Medicaid programs and state budgets than federal policymakers realize."