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House Panel Approves Bill to Delay Federal Medicaid Cuts

By Drew Armstrong, CQ Staff

April 9, 2008 -- A House subcommittee Wednesday approved legislation to block for a year Bush administration moves to cut federal Medicaid funds for specific purposes, shifting costs to the states.

The House Energy and Commerce Health Subcommittee approved the bill (HR 5613) by voice vote, after adopting by voice a substitute amendment by full committee Chairman John D. Dingell, D-Mich.

Dingell's substitute embodied a compromise with committee Republicans, who generally supported his legislation but voiced some concerns about it during meetings prior to the markup.

Specifically, the substitute clarified the bill's language to ensure that it would block only the seven new Medicaid regulations lawmakers oppose, and would not block other new administrative regulations in the future.

In return, full committee ranking Republican Joe Barton of Texas said he would support the bill, and urge the White House not to oppose it.

The administration previously said President Bush would almost certainly veto the bill. But a veto threat could prove hollow if Republicans in both chambers support the legislation, because Congress might be able to override any veto. A two-thirds vote of members present and voting in each chamber is required for an override.

Medicaid is a joint state-federal health program for the poor; the federal government pays about 57 percent of the costs on average—an estimated $204 billion in fiscal 2008. States and the federal government have long argued over how to share the program's costs.

The Congressional Budget Office estimates that Dingell's bill would cost about $1.65 billion, because the budget office has already assumed the savings from the regulations in its "baseline" financial projections.

That cost would be offset in part by anticipated savings from a provision to require electronic verification of assets of people applying for Medicaid. Another offset would take money from the Physician Quality Improvement Fund, borrowing from the fund's 2013 allocation, and repaying the money a year later.

The bill also would include $25 million each year to fight fraud and abuse in Medicaid.

The seven regulations put forward by the administration would together save Medicaid about $17.8 billion over five years, according to the CBO. They are intended to:

  • Limit state Medicaid payments to public hospitals, which would reduce federal payments as well.
  • Narrow the services the government would pay for under case management plans that some states provide patients.
  • Prohibit federal reimbursement for the costs of transporting Medicaid-eligible children to school and administering Medicaid services at schools.
  • Narrow the types of "rehabilitative" services that the federal government would pay for.
  • End federal Medicaid reimbursement for students at teaching hospitals.
  • Narrow outpatient hospital services eligible for federal reimbursement.
  • Limit taxes that some states charge health providers as a way to reduce Medicaid's draw on their budgets.

The rule on case management is already in effect; others would take effect shortly. Dingell's bill would postpone the seven regulations until April 2009, after a new president is in office.

A similar bill (S 2819) has been introduced in the Senate by Edward M. Kennedy, D-Mass.; John D. Rockefeller IV, D-W.Va.; and Olympia J. Snowe, R-Maine. In addition to the rules targeted by the Dingell bill, it would postpone two others: one involving a board that hears appeals of Health and Human Services policies and another regarding the State Children's Health Insurance Program.

Rockefeller is expected to press the Bush administration on Medicaid regulations later today, when Dennis G. Smith, director of the Center for Medicaid and State Operations at the Centers for Medicare and Medicaid Service, is scheduled to appear before Senate Finance.

Smith said last month that the administration

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