House panel OKs bill to delay Medicaid cuts

Washington -- A bipartisan bill to delay Medicaid rules that would cut billions in federal funding for hospitals and physician training has attracted support in the House.

A House Energy and Commerce subcommittee approved the legislation unanimously on April 9. The measure would prevent until April 1, 2009, the implementation of seven Medicaid rules introduced since 2007 by the Centers for Medicare & Medicaid Services. One of the regulations would eliminate on May 25 Medicaid funding for graduate medical education -- an estimated $1.78 billion over five years.

The House measure and a bipartisan Senate bill with similar provisions are the latest salvos in the battle by governors, state Medicaid directors, members of Congress, physicians and hospitals to block the rules. The Bush administration estimates that the regulations would reduce federal Medicaid spending by $13 billion over five years. Combined estimates by the states put the figure at $50 billion over five years.

Physician and hospital organizations are concerned about the impact of the cuts. The American Medical Association, although it has not endorsed the House or Senate bills, believes it would be best to delay the regulations until Congress works on overall Medicaid reform.

Atul Grover, MD, PhD, assistant vice president for the Assn. of American Medical Colleges, said the rules are "just another assault on medical education and health care that couldn't happen at a worse time. We're at a point where we need more physicians in this country because of an aging baby boomer population."

The GME rule would renege on a 40-year tradition of the federal government assisting hospitals with the cost of training medical residents and fellows, Dr. Grover said. It would eliminate enough funding to train 3,000 residents and fellows each year for five years. There are more than 100,000 such positions in the U.S., he said.

But the rules go beyond ending Medicaid support for GME. They would reduce federal spending by billions by limiting Medicaid payments to documented costs for government-owned health care facilities and by restricting hospital outpatient services to Medicare costs. Existing regulations allow government-owned facilities to file Medicaid claims based on what Medicare would pay a group of facilities for similar services.

A coalition of hospital associations led by the National Assn. of Public Hospitals and Health Systems filed a lawsuit on March 11 to block the hospital cost-limit rule, which the coalition said would lower safety net hospital funding by $5 billion over five years.

These rules would reduce public hospital funding by hundreds of millions of dollars in their first year, said Lynne Fagnani, NAPH senior vice president. That would mean massive cuts in outpatient services, emergency care and even the elimination of hospital beds. "Our members have said from the beginning that the impact is much greater than what CMS said," she said.

States are hoping for a moratorium but bracing for the regulations' impact. For example, four of the seven Medicaid rules would eliminate at least $158 million in federal funding in Colorado alone, with the GME and documented costs rules accounting for all but about $3 million of these cuts, said Joanne C. Lindsay, spokeswoman for the Colorado Dept. of Health Care Policy and Financing. The department could not estimate the financial impact of the other three regulations.

The University of Colorado Hospital would have to rethink the $165 million in care it provides to the uninsured, which represents about 10% of care at the hospital, said Greg Steigmann, MD, surgery professor and the hospital's vice president for clinical affairs. The rules would remove $30 million of support for care of the uninsured and $5 million to $6 million for staff, he said.

"The bottom line is it's going to be a devastating cutback for our ability to maintain the level of indigent care that we currently do," Dr. Steigmann said. That might include some care that by strict definition is not an emergency, such as cancer treatment. "We have not figured out exactly how we [would] manage this."

Dennis Smith, former director of the CMS Center for Medicaid and State Operations, said the seven rules are an attempt to restrain federal Medicaid spending to what is defined in law. For example, CMS can't precisely identify federal spending on graduate medical education or its benefit to the Medicaid population, he said. In general, states have steadily sought loopholes in law to increase federal Medicaid matching funds.

"These rules will help bring billions of dollars in taxpayer funds out of the shadows and will provide the accountability that is long overdue," said Smith, who after seven years in his position left CMS on April 11.

The House measure, known as the Protecting the Medicaid Safety Net Act of 2008, at press time, was expected to receive a full House Energy and Commerce Committee vote in mid-April and a full House vote after that. The Senate bill, introduced April 3, also would delay the rules until April 1, 2009, but it includes a number of other provisions and had not been scheduled for a committee vote as of press time. The House bill has 164 co-sponsors while the Senate bill has 12.

The bipartisan support for the House legislation is a change of pace for members of the Energy and Commerce panel. Rep. Frank Pallone (D, N.J.), chair of its health subcommittee, said the wide support was drivenby activity in members' districts. For example, all 50 governors signed a letter earlier this month calling for a delay in the regulations, he said.

The Bush administration, at press time, expressed opposition to the House bill in its current form.

The measure would block the Centers for Medicare & Medicaid Services from implementing important regulations protecting the fiscal integrity of the Medicaid program, put billions of dollars of federal funds at risk, and turn back progress that has already been made to stop abusive state practices, said Health and Human Services Secretary Michael Leavitt in a letter to Rep. John Dingell (D, Mich.), chair of the House Energy and Commerce Committee.

The other Medicaid rules would affect physicians less directly. They include reimbursement for Medicaid outreach work by staff not employed by the state or a Medicaid agency.