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Feds Warn 2 More States to Expand Medicaid or Risk Hospital Funds

Add Tennessee and Kansas to the list of states that have been warned by the Obama administration that failing to expand Medicaid under the Affordable Care Act could jeopardize special funding to pay hospitals and doctors for treating the poor.

By Phil Galewitz

Add Tennessee and Kansas to the list of states that have been warned by the Obama administration that failing to expand Medicaid under the Affordable Care Act could jeopardize special funding to pay hospitals and doctors for treating the poor.


The Centers for Medicare & Medicaid Services confirmed Tuesday that it gave officials in those states the same message delivered to Texas and Florida about the risk to funding for so-called “uncompensated care pools” — Medicaid money that helps pay the cost of care for the uninsured.


The letter to Florida officials last week drew the ire of Republican Gov. Rick Scott who said the federal government should not link the $1.3 billion in uncompensated care funding with the state’s decision not to expand Medicaid. He has threatened a lawsuit against the Obama administration if it cuts off the funding, which is set to expire June 30.


The Texas funding is scheduled to end in September 2016. Officials there have also expressed indignation at what they perceive to be coercive pressure and talked about joining Scott’s lawsuit.


Kansas Medicaid officials said they received about $45 million this year in federal funding for their state uncompensated care program, which began  in 2013 and is slated to continue through 2017.


Tennessee Medicaid spokewoman Kelly Gunderson said her state gets over $750 million in federal funding to cover uncompensated care.


The first message was delivered in an April 14 letter from Vikki Wachino, acting director of the Center For Medicaid and CHIP Services, to Florida Medicaid officials. She said that expanding Medicaid coverage is a better way to help patients and providers get access to health care than an “overreliance on supplemental payments” to providers through a program called the Low Income Pool, or LIP.


“Medicaid expansion would reduce uncompensated care in the state, and therefore have an impact on the [Low-Income Pool], which is why the state’s expansion status is an important consideration in our approach regarding extending the LIP beyond June,” she wrote.


CMS spokesman Aaron Albright said Tuesday the Obama administration wants to apply similar principles to all the states that receive such funding, whether or not they expanded Medicaid.


“We’ve been in contact with those states that have uncompensated care pools and reiterated that we look forward to an ongoing dialogue to develop a solution that works for patients, hospitals and the taxpayer,” he said. “We told states that our letter to Florida articulates key principles CMS will use in considering proposals regarding uncompensated care pool programs in their states, but that discussions with each state will also take into account state-specific circumstances.”


CMS officials confirmed they have also reached out to states that expanded Medicaid about the future criteria for the funding, including California, Massachusetts, Arizona, Hawaii and New Mexico.


Each state has negotiated its own program with the federal government to pay providers for treating the uninsured. But the programs differ in scope, funding and length of time remaining.


Judy Solomon of the left-leaning Center on Budget and Policy Priorities said the special federal funding that some states negotiated for uncompensated care was never supposed to last indefinitely. The need for the funding changed dramatically as millions of people gained health coverage under the health law, she said.


“These demonstration programs are at the discretion of the Secretary of HHS and there is no entitlement to any state or providers to continue these funding arrangements when they expire,” Solomon said, adding, “The need for uncompensated care funding is changing dramatically.”


Arizona Medicaid spokeswoman Monica Higuera Coury said her state, which did expand Medicaid, was also told that the special funding would begin to be phased out this year. Arizona receives a maximum $137 million a year to offset uncompensated care costs at Phoenix Children’s Hospital.  “We are looking forward to working with …CMS to put a transition plan together that moves us away from total reliance on the [funding] while still protecting this very important safety net for our children,” she said.


Some experts were surprised the Obama administration linked Medicaid expansion to the special funding because of the potential legal issues.


“No one would be shocked to hear that states don’t need the money because uncompensated care has dropped … but saying you are taking away this money because you are not expanding is trickier,” said Charlene Frizzera, a senior advisor at consulting firm Leavitt Partners.  “People are shocked that CMS has done that.”


But Joan Alker, executive director of Georgetown University’s Center For Children and Families, said the administration was simply acting as a steward of taxpayer money.


“I wouldn’t call it hardball, but rather responsible policy and fiscal oversight to ensure that federal tax dollars are spent in the most effective way,” she said. “When coverage is available to reduce the number of uninsured people  … and states refuse those funds, why should the federal government provide them with unauthorized funding to put a Band-Aid on it?”

Caroline Cournoyer is GOVERNING's senior web editor.
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