6 rules cutting Medicaid delayed until 2009

Washington -- Six Bush administration rules that would reduce Medicaid spending have been put on hold until more than two months after the next president is sworn into office.

President Bush signed a military spending bill into law on June 30 with provisions to delay the rules until April 1, 2009. The House and Senate adopted the bill with large majorities in late June. The Centers for Medicare & Medicaid Services estimates that the rules would reduce federal Medicaid spending by about $13 billion over five years.

The rules are a CMS effort to limit federal Medicaid spending to medically necessary services with statutorily defined funding requirements. The changes include ending federal Medicaid support for graduate medical education. They also would limit federal Medicaid matching funds for government-owned hospitals to a narrow set of incurred costs. This would mean that federal Medicaid funds no longer could be used for the broader purposes of caring for the uninsured, financially shoring up such services as trauma and burn care, reducing health disparities and expanding public hospitals' infrastructure, states the National Assn. of Public Hospitals and Health Systems.

Opponents of the rules said CMS overstepped its authority to manage Medicaid spending and reneged on a tradition of federal support for many programs and services. They also said the agency underestimated the financial impact. A House Oversight Committee survey of state Medicaid directors concluded that the changes would cut federal Medicaid spending by up to $50 billion over five years.

Lynne Fagnani, senior vice president of the public hospital association, said the organization would lobby to prevent the rules from taking effect next year. Still, she said, the organization was thankful lawmakers adopted legislation to delay them.

A provision to block a seventh rule did not survive legislative negotiations. This rule would narrow the definition of Medicaid outpatient hospital services for which the federal government will pay. A CMS spokeswoman said the agency plans soon to issue a final version of that rule.

The American Medical Association said it is pleased that Congress adopted the moratorium because the changes would have forced states to restrict Medicaid enrollment and coverage, and to cut hospital and physician payments. The AMA looks forward to working with the nation's governors on the issues raised by the administration rules.

The National Assn. of State Medicaid Directors, American Academy of Pediatrics and American Hospital Assn. welcomed the delay of the six rules, but expressed disappointment the seventh rule was not postponed.