OCT.  16, 2000

Medi-Minutes
HHS Proposes Rules to Close Medicaid Loophole

Health and Human Services (HHS) has announced a proposed rule to close a loophole in Medicaid regulations that, according to HHS Secretary Donna Shalala, "costs the federal taxpayers billions of dollars without commensurate increases in coverage or improvements in the care provided to Medicaid beneficiaries."

Under current Medicaid regulations, states have broad flexibility in setting Medicaid rates that they pay to nursing homes, hospitals, and other providers. Some states are using this flexibility to pay excessive rates to a few county or municipal facilities. After these states claim federal matching funds based on those payments, they can require those facilities to return some or all of the extra money for other uses, often unrelated to Medicaid and in some cases unrelated to health care at all.

The proposed regulation would revise Medicaid’s "upper payment limit" rules, stopping states from using these techniques. The changes would be phased in over five years to allow states time to adjust their Medicaid programs to meet the new requirements. The proposal also allows a continued higher limit on payments for public hospitals in recognition of their critical role in serving low-income patients. States will have an opportunity to comment on all aspects of the proposal before it is finalized.

The proposal has already come under fire from various groups, who claim that it ignores the needs of the health care community.