GOP report warns of misuse of Medicaid funds

Washington -- The recent federal stimulus package is allowing states to use Medicaid funds to cover budget shortfalls in other areas without maintaining fees for physicians, hospitals and others, according to a new report by House Republican staffers.

The American Recovery and Reinvestment Act, enacted in February, provided a 6.2% increase in federal matching Medicaid funds for states between Oct. 1, 2008, and Dec. 31, 2010. States qualify for the funding if they have kept or restored their Medicaid eligibility standards and procedures to their July 1, 2008, levels. States also are not allowed to put the special Medicaid funding into any reserve or rainy-day fund.

But the report -- released April 15 by Rep. Darrell Issa (R, Calif.) -- notes that pay for hospitals, physicians, nursing homes and others caring for Medicaid enrollees is not protected from cuts (link).

The report was written by Republican staff on the House Oversight and Government Reform Committee. Issa is the highest-ranking Republican on the panel.

The report cites eight states as examples of how the act's Medicaid funding is being diverted for other uses, is failing to prevent fee cuts or is not being used to enroll people who recently became eligible for Medicaid. New York, for example, adopted a $132 billion fiscal 2010 budget that cuts hospital inpatient care by $225 million. In return, the budget provided teaching hospitals with $270 million in transitional money to care for uninsured patients and increased physician Medicaid fees.

Ann Kohler, director of the National Assn. of State Medicaid Directors, said nearly all states are experiencing budget problems and that Medicaid is a large part of the budget in every state. The new federal dollars are being used to address planned or potential Medicaid cuts, she said.