States Warned About Intergovernmental Transfers

The Health Care Financing Administration has announced that it will soon release a set of regulations to cut down on illegitimate "intergovernmental transfers," a payment mechanism which some states abuse to increase Medicaid matching money from the federal government. HCFA said that this practice by states, in cooperation with public hospitals and nursing homes, has increased federal Medicaid expenditures by $1.9 billion in fiscal 2000 alone.

According to HCFA, states abusing this practice temporarily transfer money into their own Medicaid programs, thereby earning higher matching funds from the federal government. Some states then use those funds for purposes unrelated to Medicaid. In some cases, as little as 5% is properly allocated.

Some hospital groups fear that Congress and the Clinton Administration may point to the increasing expenditures to argue against increases in Medicaid disproportionate-share payments. "We’ve lobbied for 20 years for increased funding for Medicaid and the uninsured," said Larry Gage of the National Association of Public Hospitals. "And things like this can put that in jeopardy."

Clinton Plans Medicare Drug Cuts

The Clinton Administration has announced plans to cut Medicare payments for anticancer drugs administered in doctors’ offices. Both the medical community and Congress have voiced objections to the planned cuts, which will affect hundreds of thousands of elderly patients.

Donna Shalala, Health and Human Services Secretary, said that recent data on drug costs shows that Medicare pays too much for these drugs. Doctors admit that the payments they receive are more than the prices they pay for the drugs. But they said that the extra money is used to pay for administration of those drugs and for chemotherapy costs that Medicare does not cover. According to doctors, these payment decreases will cause many doctors to send their patients to hospitals for treatment, thus causing inconvenience and increasing the costs to Medicare.