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HHS 'Hit List' Names States in Federal Crackdown on Shady Medicaid Accounting

APRIL 8, 2005 — A document dubbed by sources outside HHS as a "hit list" that the department is using in a federal crackdown on dubious Medicaid accounting tactics names 15 states as potentially using the techniques, 20 as having agreed to drop them, and 12 more whose use of the controversial techniques is still unknown.

CQ HealthBeat learned that HHS Secretary Michael O. Leavitt provided the document on a confidential basis last month to the House Energy and Commerce and the Senate Finance committees, as well as to the offices of Senate Majority Leader Bill Frist, R-Tenn., and Speaker of the House J. Dennis Hastert, R-Ill.

The existence of the list has been known for months but HHS has declined to release the names of targeted states to the public. "That there are states that may have inappropriate funding practices is not a big secret," said Gary Karr, spokesman for the Centers for Medicare and Medicaid Services. Karr said the states aren't being named publicly because "we're not trying to shame one state over another. We're trying to work constructively with states. We haven't compiled any hit list."

The list is of intense interest to states because they stand to lose hundreds of millions on dollars in the crackdown on what CMS refers to as "recycling." Critics charge that the tactic unethically or illegally inflates the amount of state money eligible for federal matching dollars under the Medicaid program, robbing taxpayers of hundreds of millions if not billions of dollars yearly.

States heatedly deny they are doing anything illegal, and say the added money overwhelmingly goes for legitimate purposes including funding health care for people who otherwise would not get care.

One example critics cite as an abusive state technique is to have local governments claim they pay far higher rates for health care than they actually do. The added federal dollars obtained by overstating payment rates are then recycled to the state government for other uses, critics say.

The HHS document provided to Capitol Hill names the following states as "potential" recyclers, adding that the states themselves may disagree with that characterization: Alabama, Alaska, California, Georgia, Idaho, Illinois, Iowa, Massachusetts, Minnesota, Mississippi, North Carolina, North Dakota, Tennessee, Virginia, and Washington.

States identified as having agreed to revise their accounting to drop "recycling" are: Alabama, Arkansas, Kansas, Kentucky, Louisiana, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nebraska, New Hampshire, New York, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Washington, and Wisconsin.

Some states appear on both lists because they may have dropped recycling for one type of health care spending but not for another.

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