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Pay-As-You-Go May Prevent Block of Medicaid Rule

By Alex Wayne, CQ Staff

April 1, 2008 -- If Democrats want to block new Medicaid regulations that states complain would cost them too much, they might need to come up with a lot of money.

Legislation (HR 5613) that would postpone all or part of seven Medicaid regulations the Bush administration plans to implement would cost $1.65 billion in fiscal 2008 and 2009, according to a preliminary analysis by the Congressional Budget Office (CBO).

House Energy and Commerce Chairman John D. Dingell, D-Mich., introduced the bill March 13. CBO's cost score could complicate the bill's advancement. Under pay-as-you-go budget rules Democrats implemented last year, lawmakers must couple proposals that cost money with legislation that would save or raise an equal amount.

The Medicaid regulations have been a subject of dispute since last year, when the administration proposed them. Generally, they are aimed at preventing states from claiming federal reimbursement for services the administration doesn't think should be covered under Medicaid.

CBO says Dingell's postponements will cost money because the budget office has already assumed in its "baseline" financial projections that the regulations take effect, a routine practice for the agency.

It is not clear how Democrats might overcome the problem. They have struggled since taking control of Congress to find spending offsets for many of their legislative priorities. Right now, lawmakers are debating how to offset the cost of reversing a scheduled cut in Medicare reimbursements for physicians.

One Senate GOP aide speculated that Democrats might include language in must-pass legislation, such as a supplemental spending bill for the wars in Iraq and Afghanistan, allowing them to postpone the Medicaid regulations without offsetting the cost. But that could upset conservative Democrats in the House who have been sticklers for the pay-as-you-go budget rules, and it could open the party to criticism from Republicans.

An Energy and Commerce spokesperson said: "The cost of providing critical Medicaid services pales in comparison to what we'd see if the administration's new rules are implemented and these services are cut. An increasing number of low-income and disabled Americans would be forced to seek health care services in emergency rooms, the most expensive option available."

Whose Dime?
The health entitlement for the poor is a joint state—federal program, and the two areas of government have long argued over who should bear more of the burden for the program's cost.

Those arguments have intensified in the waning years of the Bush administration, as the federal government has tried to crack down on states that have used creative schemes to draw extra federal Medicaid dollars.

The federal government pays about 57 percent of the program's costs, a sum that is expected to total about $204 billion in fiscal 2008.

The regulations the administration has proposed would limit or bar federal reimbursement for a number of Medicaid services. CBO says that all of the Medicaid regulations planned for 2008 would together save the government about $19.6 billion over five years.

Congress postponed four of the regulations last year, but those moratoriums will begin expiring in May. Dingell's bill, which he introduced March 13, would extend the moratoriums until April 2009—when a new president will be in office—and would postpone all or parts of three other regulations until next spring, as well.

The four regulations postponed last year would limit Medicaid payments to public hospitals, eliminate federal reimbursement of hospital interns' and residents' salaries, narrow federal reimbursement for rehabilitative services, and eliminate federal reimbursement for transporting Medicaid-eligible children to school and administering Medicaid services at schools.

Dingell also seeks to postpone all or part of three other regulations. Those would limit federal reimbursement for case management services that some states offer Medicaid patients, narrow reimbursement for outpatient hospital services, and limit taxes some states levy on health providers to help pay the state share of Medicaid costs.

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