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Supplemental's Passage Hailed by Health Care Groups

By John Reichard, CQ HealthBeat Editor

May 25, 2007 -- Congressional passage of the emergency spending bill (HR 2206) funding the Iraq War drew praise from hospital groups Friday for delaying, by one year, two regulations that would have trimmed Medicaid spending by $5.6 billion over five years. The measure also provides funding for states facing shortfalls this year under the State Children's Health Insurance Program (SCHIP) and saves a Wisconsin state program assisting lower-income seniors with their prescription drug costs.

The measure delayed one Medicaid regulation the Bush administration sought to end: controversial accounting methods used by states to increase federal Medicaid funding, heading off $3.8 billion in cuts over five years. And it halted another regulatory proceeding that would have ended federal Medicaid outlays for graduate medical education, sparing hospitals another $1.8 billion hit.

"We applaud congressional leadership for recognizing that harsh spending cuts will not solve Medicaid's problems," said Rick Pollack, executive vice president of the American Hospital Association.

"We fully appreciate that the Medicaid program can and should be reformed and improved," said Larry Gage, president of the National Association of Public Hospitals and Health Systems. "We look forward to working closely with the Congress over the next year to craft statutory reforms that improve the Medicaid program and strengthen, rather than destroy, our safety net."

The Bush administration, meanwhile, notified lawmakers Friday that despite the delay, it plans to publish in final form that regulation trimming $3.8 billion in Medicaid spending May 29. The regulation would prevent states from claiming federal funds for health care provided by local governments in amounts exceeding their cost of providing services to Medicaid patients.

The Bush administration and other entities, including the Government Accountability Office and the Health and Human Services Office of the Inspector General, have challenged the legality of the financing mechanism.

"We intend to comply with the statute" imposing the one-year delay, said Jeff Nelligan, director of media affairs for the Centers for Medicare and Medicaid Services (CMS). "In the interests of transparency, we wanted interested parties and the public to see the decisions that we made in responding to public comments on the proposed rule. This way, the public . . . will also see that we are still soliciting comments on the provision of the rule related to the definition of governmental entities."

But congressional Democrats said the effect of those Medicaid changes would be to cut off funding for facilities providing health care to poor people and children.

"Any change in Medicaid funding can have a dramatic impact on children's hospitals," the National Association of Children's Hospitals (NACH) said in a statement Friday. NACH President Lawrence McAndrews said, "When Medicaid funding is restricted, the pediatric safety net is put at risk."

In addition to praising the delay of the Medicaid changes, NACH lauded lawmakers for providing up to $650 million in federal money to address SCHIP funding shortfalls. "Any lapse in funding could result in children not receiving the care they need at the time they need it," McAndrews said.

The Congressional Budget Office has estimated that the net federal cost of the added SCHIP money could be as low as $396 million because of savings resulting from some children on SCHIP not having to go on Medicaid.

The spending measure also extends, through December 31, 2009, the SeniorCare program in Wisconsin that CMS said would end June 30 on the grounds that it was no longer needed because of the prescription drug benefit that began in 2006 under Part D of the Medicare program.

Senate Aging Committee Chairman Herb Kohl, D-Wis., held a hearing earlier this year in which state officials testified that many low-income enrollees in Wisconsin receive greater financial assistance under SeniorCare than under Medicare Part D.

"The administration tried to kill SeniorCare despite that fact that it is supported by the public, the state legislature, the governor, and the entire Wisconsin congressional delegation," said Rep. David R. Obey, D-Wis. "I'm glad we were able to overcome their resistance," he said.

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