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Study Finds Facilities Hard-Hit by Proposed Medicaid Cuts

By Mary Agnes Carey, CQ Health Beat Associate Editor

October 31, 2006 -- Texas, Louisiana, and California would be among the hardest hit states if the Bush administration implements its proposal to cut $12.2 billion in Medicaid funding over the next five years, according to a new report.

The study, compiled for the American Health Care Association (AHCA), which represents long-term care providers, said the proposal would reduce by $104 million federal spending for intermediate care facilities for individuals with mental retardation or developmental disabilities. The cuts, the group said, are slated for implementation in the coming weeks, "perhaps even the day after the November elections."

In a statement, Bruce Yarwood, AHCA president and chief executive officer, said the proposed reductions "pose a direct and immediate threat to our nation's citizens with developmental disabilities who are cared for in these facilities."

The proposals include limiting payments to providers, reducing the allowable provider tax rate from 6 to 3 percent, and other Medicaid spending curbs. Limiting the extent to which states can tax providers, such as nursing homes, hospitals, and facilities for the mentally disabled, would in turn reduce federal Medicaid matching payments.

In June, 44 senators asked Department of Health and Human Services Secretary Michael O. Leavitt to not make the spending cuts, stating that the reductions would reduce funding nationwide for long-term care by $1.6 billion, forcing some rural nursing homes to close and limiting services to the mentally disabled as well as harming some hospitals. In May, 82 House members also asked HHS to not make the changes.

According to the report, compiled by the firm ElJay LLC, intermediate care facilities for individuals with mental retardation or developmental disabilities in Texas would lose $38.1 million in federal Medicaid funding if the administration's cuts were put in place, while Louisiana would see a $14.6 million reduction. Such facilities in California would see their Medicaid payments reduced by $13.7 million and Illinois would see a $9.8 million drop, according to the report.

HHS spokeswoman Christina Pearson said the agency continues "to support the president's proposal, which helps alleviate significant tax burdens on health care providers for obligations to the Medicaid program that are otherwise the responsibility of the states."

Separately, AHCA also has compiled a list of what the proposed changes to Medicaid would mean for nursing homes. Overall, nursing homes would lose $1.54 billion, with Pennsylvania nursing homes losing $167 million in federal Medicaid funding; California nursing homes would lose $125 million and New York facilities would see $114 million in cuts, the group estimates.

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