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New Medicaid Rules Would Shift More Burden to States, Report Says

By Alex Wayne, CQ Staff

March 3, 2008 -- New rules for Medicaid would reduce federal payments to states by nearly $50 billion over five years—more than three times earlier government estimates, according to a report released Monday by a House committee.

The Bush administration plans to roll out at least seven new Medicaid regulations this year that together comprise a plan to curtail expenses in the program the administration considers unnecessary or inappropriate. The Centers for Medicare and Medicaid Services had estimated that the new rules would reduce the federal share of Medicaid's costs by about $15 billion over the next five years.

Medicaid is a joint federal–state health entitlement program for the poor in which the federal government pays about 57 percent of the costs. The federal share is estimated to total about $204 billion in fiscal 2008.

States and the federal government have been locked in a years-long struggle over which should bear more of the costs of Medicaid, which, like other health programs, is growing more rapidly than inflation. The government and the Government Accountability Office have accused states of using improper schemes to draw higher federal Medicaid payments than they qualify for.

But states have complained since last year that the planned new regulations would shift too much of the program's costs to them. Medicaid is the most expensive line item in many states' budgets, so any increased costs can cause governors and state legislators a fiscal headache. The first regulation, which limits federal reimbursement for ancillary services states provide Medicaid patients, such as help finding housing and jobs, took effect Monday.

The Oversight and Government Reform Committee's Democrats asked all states to provide an estimate of what the new Medicaid regulations would cost them. The panel received responses from 43 states and the District of Columbia, its Democratic staff said in the report, comprising 95 percent of total Medicaid spending.

The costs range from $7.4 million over five years in Ohio to $10.8 billion over the same period in California.

"As the economy tips into recession, the last thing we should be doing is taking federal funds from states, especially funds that are supposed to help people with their health and medical expenses," the committee's chairman, Henry A. Waxman, D-Calif., said in a statement.

The panel's report said the centers did not respond to requests to provide its own estimates of the state-by-state fiscal impact of the regulations.

A CMS spokesman did not immediately provide a response to the report.

Congress acted last year to postpone three Medicaid regulations. But those moratoria have started to expire, and Republicans have said they want an in-depth examination of the regulations through congressional hearings before they will consent to further postponements.

The Senate adopted an amendment to an American Indian health care bill (S 1200) it passed last week that would postpone the regulation that took effect Monday. However, the House has not acted on the Indian health legislation.

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