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State's Claim to Federal Medicaid Funds Shrinks

Posted on: Wednesday, 6 July 2005, 21:01 CDT

Jul. 6--Georgia has a new hole in its Medicaid budget.

State officials said Tuesday that they will lose $300 million a year after agreeing to stop using a financing scheme that allowed them to attract more federal dollars to pay expenses of the government program for the poor and disabled.

The Georgia Department of Community Health said the state received an extra $300 million for its Medicaid program in each of the past two years by using an accounting move that a congressional investigative agency recently said was inappropriate. That funding --- roughly 7 percent of the federal money Georgia receives for Medicaid --- will stop as a result of a June agreement between state officials and the U.S. Centers for Medicare and Medicaid Services.

The immediate shortfall for this year is about $146 million. Community Health Commissioner Tim Burgess said the state carried over $154 million of the $300 million received last fiscal year into the new year, which began July 1.

It's too early to tell what the funding gap will mean to Georgia's Medicaid budget --- or to those who rely on services. But the loss of federal money can only add pressure to the increasingly expensive program, which provides health coverage to 1.5 million people. Georgia's Medicaid spending has been rising by about 14 percent a year as enrollment and health care costs continue to increase.

Recent cuts in Medicaid and PeachCare, the state's health program for uninsured children, have led to children losing their coverage, a scaling back of the state's PeachCare dental plan, reduced Medicaid coverage for low-income pregnant women, and cuts in payments for speech therapists who treat children.

Charles Willis, 52, of Atlanta said Tuesday that, while he did not know about the latest developments, he and other Medicaid patients were worried about the future of the program. Willis, who works as a certified peer specialist, said he is HIV-positive and has been diagnosed with a mental illness.

"I've learned to pay rent, be self-sufficient, even have a positive impact on the community," Willis said. "It's kind of scary when you start thinking about [further] budget cuts. Because of the health care I've been provided through Medicaid, it's really made a difference."

The state said Tuesday that it plans to assess a fee on the health maintenance organizations, or HMOs, that will serve Medicaid patients next year to help fill this budget gap. The assessments will provide some additional money, but state officials say they won't prevent a shortfall this year.

State Rep. Jeff Brown (R-LaGrange), chairman of a House health subcommittee, said state leaders have been preparing for the dip in federal funds for several months. "All of us have known that a portion of the dollars were in jeopardy," Brown said. "Finally, CMS has said to all of the states, 'No more.""

Brown said state officials considered the impact of the loss of federal funds when they began accepting bids for managed-care companies to take over a large portion of the Medicaid program, a cost-saving initiative pushed by Gov. Sonny Perdue.

But state Rep. Carolyn Hugley (D-Columbus) said she's not convinced the HMOs will be able to save enough money to make up for the loss of federal money.

"It's going to be a big challenge for them," Hugley said. "I think we're putting a lot of confidence in a system we don't know a lot about."

Medicaid operates with a blend of state and federal money. Every $1 the state spends on the program is matched by $1.54 in federal funds. U.S. Health and Human Services Secretary Michael Leavitt said earlier this year that he wants to curb "accounting gimmicks" that states use to get extra federal dollars, and federal officials say they have worked with states to end such financing arrangements.

A report issued last week by the U.S. Government Accountability Office criticized various tactics Georgia used to gain additional federal funds for Medicaid. These accounting strategies were created by a consulting firm to which the state will pay more than $110 million in contingency fees for its work to lure extra federal dollars for Medicaid and other state programs. Most of that money has already been paid to the firm, Copeland Glenn, the state said. State officials have said the revenue project helped pull in more than $2 billion in added federal funding.

When asked about the GAO findings, state officials referred to Burgess' written response to the report in which he defended Georgia's financial strategies and said using consultants was necessary to navigate the complexity of the Medicaid program.

As of 2004, 34 states had used consultants to lure extra federal Medicaid dollars, the report said.

States have used several methods to get extra federal dollars for their Medicaid programs since the late 1980s.

Georgia and others used financing plans such as this one: Hospitals or nursing homes send money to the state. The state uses that money to get more federal matching funds. It then uses those federal funds to pay nursing homes and hospitals more for the services they provide. Those providers wind up getting more than they originally contributed, and the state has been able to keep some of the extra funds for general Medicaid spending.

The federal government has not asked Georgia to pay back any money from inappropriate accounting methods, Burgess said. Yet Medicaid's federal administrator, Dr. Mark McClellan, said in his response to the GAO findings that agency officials in Boston and Atlanta are working "to identify and recover any unallowable claims."

By Andy Miller and Sonji Jacobs

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Source: The Atlanta Journal and Constitution

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