Rule Tightens States’ Medicaid Accountability

Twenty states that have used a Medicaid loophole to inflate how much they are spending for medical services and generate large federal reimbursements soon will have to operate under tighter restrictions. A proposed federal rule issued Thursday aims to eliminate the gap and save the government billions of dollars.

“We cannot stand by while billions of taxpayer dollars are used without the accountability that federal taxpayers deserve,” said Health and Human Services Secretary Donna Shalala.

The states involved are California, Alabama, Illinois, Indiana, Iowa, Massachusetts, Michigan, Minnesota, Nebraska, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Oregon, Pennsylvania, South Carolina, Tennessee and Washington.

Several states apparently used the loophole unchecked for years but the method soon caught on among local lawmakers. After a large influx of more states taking advantage of the loophole in the last year, the government in July wrote states and asked that they stop the practice.

The use of the loophole apparently cost the government $2 billion in the last fiscal year alone.

States apparently won’t feel an immediate crunch from the regulations. The proposed rule phases out the extra payments over five years.

Also, federal officials would continue a higher level of payments for public hospitals, which often serve considerably more lower-income patients.