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Administration Eyes Concessions on Medicaid Regs, Hill Sources Say

By John Reichard, CQ HealthBeat Editor

April 24, 2008 -- On the heels of House passage of a measure that would suspend seven cost-cutting Medicaid regulations until next year, the Bush administration is mulling a strategy that would accept a limited moratorium on two of them, Capitol Hill sources say.

Kerry Weems, acting administrator of the Centers for Medicare and Medicaid Services, acknowledged the possibility that the administration might be open to discussions about changes in individual regulations. "We're always willing to talk, and if that looked like a fruitful route we might be willing to do that," Weems told reporters after a speech Thursday to the National Conference of State Legislatures.

Weems declined to discuss which of the seven regulations the administration might be willing to change. In his speech, he stoutly defended all seven as essential to protecting the financial integrity of a program that can ill afford wasteful spending in light of the overwhelming financial challenges it faces with the retirement of the baby boomer population.

But according to Capitol Hill sources, one of the regulations deals with ending Medicaid payments for graduate medical education and the other addresses "intergovernmental transfer" payments, which the administration and outside analysts say states have used to draw down federal Medicaid dollars to which they are not entitled.

Hospitals have been pressuring lawmakers to place a moratorium on the graduate medical education regulation. The intergovernmental payments are extremely sensitive politically because they in part have funded safety net programs for poor patients. Many reports by the Government Accountability Office and the inspector general of the Health and Human Services Department say these "IGT" payments are tantamount to fraud because they falsely suggest that they go to certain health care facilities which in fact do not get to keep them.

The House passed the legislation (HR 5613) by a vote of 349–62 on April 23. It would place a moratorium on all seven regulations until March 31, 2009. Under the strategy the administration is considering, moratoria on the two regulations would extend until the end of August while the other five regulations would go into effect as scheduled.

The limited moratoria would give lawmakers time to try to address the policy issues underlying the two regulations. It's those two regulations that are driving the votes on Capitol Hill, a congressional aide said. If lawmakers were unable to come up with a policy solution, the moratoria would continue through March 31, 2009.

The Senate Republican leadership is circulating a letter that defends the regulations as necessary to ensure the financial integrity of Medicaid, and urges rejection of the House measure. If the draft letter attracts enough signatures to show supporters of the House bill that they couldn't override a veto in the Senate, the administration will offer the limited moratorium strategy, the congressional aide said.

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