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Govs Call on Congress to Block CMS Rule on Public Providers

By Rebecca Adams, CQ Staff
February 23, 2007 -- The nation's governors sent a letter to congressional leaders in both parties Friday asking them to block the Centers for Medicare and Medicaid Services (CMS) from issuing a rule in the coming months that state officials say could cost them $5 billion over five years.

The administration's proposal, issued in January, is aimed at stopping states from using funding mechanisms that federal officials say exaggerate the amount of money states actually spend for legitimate purposes in the Medicaid program, boosting federal payouts beyond the legal limit percentage the federal government pays for a state's Medicaid program. CMS proposed legislation to implement this policy last year but could not get it through Congress. Now the administration hopes to go forward with a rule this year.

The governors say the proposed rule would limit funding that could be paid to public providers, affecting a broad range of providers since it would redefine which hospitals and nursing homes would be considered "public." They also say that the proposal would "diminish longstanding, legitimate state funding mechanisms" that CMS has previously approved. The changes would impose "a huge administrative burden" on states, providers, and school-based health clinics, the governors wrote.

"The Medicaid administrative changes contained in the proposed rule . . . are a significant cost shift to states that governors strongly oppose," said the NGA letter, signed by New Jersey Gov. Jon Corzine, a Democrat, and Vermont Gov. Jim Douglas, a Republican. "The administration is moving forward with these proposed changes without any input from Congress or governors."

The letter called on Congress to "pass legislation to prevent CMS from moving forward with this proposed rule." The governors concluded that "these proposals would further impede our progress in implementing reform options and expanding affordable health insurance coverage."

CMS spokesman Jeff Nelligan said Friday, "Our goal is to ensure that taxpayer dollars are spent wisely and that low-income Medicaid beneficiaries receive the care they need. We believe the lack of transparency and accountability in Medicaid financing undermines public confidence in the integrity of the program as it is impossible to track the flow of taxpayer dollars."

He added, "Limiting federal reimbursement to a government provider to the cost of delivering service only makes sense. If a government agency is making a 'profit' off the federal taxpayer, something is wrong."

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