Teaching hospitals, residencies win reprieve on Medicaid cuts

Two proposed rules limiting Medicaid hospital payments, including contributions to graduate medical education, have been postponed until at least Aug. 1.

The rules were slated to take effect May 25, but a court ruling on one prompted the Centers for Medicare & Medicaid Services to voluntarily delay implementing both rules, which are closely linked.

At stake are billions in annual payments Medicaid makes to teaching hospitals.

"These regulations will seriously damage our nation's health safety net and have dire effects on patients," Darrell G. Kirch, MD, president and CEO of the Assn. of American Medical Colleges, said in a statement.

One of the rules is called the intergovernmental transfer, or IGT, which sets an upper limit on Medicaid payments and means an estimated annual $10 billion for teaching hospitals.

The other is a CMS rule change that would end federal Medicaid payments for graduate medical education. The government estimates this change would mean a $1.78 billion reduction in teaching hospitals' Medicaid payments over five years, but graduate medical education leaders say it could be that much annually.

Education experts estimate that New York, which trains 16,500 residents, the most of any state, would lose more than $1 billion a year if this rule change gets implemented.

Court ruling helped hospitals

Teaching hospitals recently won a lawsuit to block implementation of the IGT rule. In May, the U.S. District Court for the District of Columbia found that CMS violated a one-year congressional moratorium on the IGT rule when it issued a final regulation on it the same day the president signed the moratorium into law.

"In this case, the court is asked to decide whether a maneuver by the executive branch deliberately designed to outfox a clear directive of Congress was successful. The answer is no," U.S. District Judge James Robertson wrote in the ruling.

The court found that the moratorium prevented CMS from taking action to advance the rule for one year, beginning May 25, 2007.

The rule now can move forward. But Atul Grover, assistant vice president of the AAMC, a plaintiff in the suit, said the rule-making process means that the rule could not go into effect any sooner than mid-September. This could give lawmakers time to reverse the rule or put another moratorium on it.

The second issue, a CMS rule change to end federal Medicaid payments for graduate medical education, also came to a head in May.

On May 25, a one-year moratorium ended on a CMS proposed rule change that would eliminate federal matching funds for state Medicaid graduate medical education payments to teaching hospitals. Federal matching funds have been in place for more than 40 years.

On May 22, however, the Senate passed an amendment to an Iraq spending bill that contained language extending the moratorium on several Medicaid regulations, including the rule that would end federal Medicaid graduate medical education payments.

The Senate bill and a similar measure passed by the House postpone the Medicaid rules until April 1, 2009. At AMNews press time in late June, President Bush was expected to sign the legislation, officials said.