Roth Introduces Legislation to Close Multi-Billion Dollar Medicaid Payment Scheme Loophole
WASHINGTON -- Senate Finance Committee Chairman William V. Roth, Jr. (R-DE) today introduced the "Medicaid Protection Act." This legislation would shut down a growing Medicaid loophole that is threatening to drain tens of billions of dollars from the program. Senator Roth submitted the following statement to the Congressional Record:
"Over the past several months, the Finance Committee has been focusing its oversight attention on an urgent problem in the Medicaid program related to the use of upper payment limits to exploit federal Medicaid spending. The Health Care Financing Administration (HCFA) had assured me that it would solve the problem. It has not.
"Instead, last week HCFA released a notice of proposed rulemaking that sanctions the de facto abuse of this vitally important program -- a program that provides health care coverage to 40 million low-income pregnant women, children, individuals with disabilities, and senior citizens. This Administration has failed to live up to its responsibility to protect the financial integrity of the Medicaid program. Accordingly, I am introducing legislation today to do the right thing and stop the draining of potentially tens of billions of dollars from this program for our most vulnerable citizens.
"The problem confronting the program is a complicated one. Through the inappropriate use of aggregated upper payment limits, some states have been using the Medicaid program inappropriately, including for purposes such as filling in holes in state budgets. This has turned a program intended to provide health insurance coverage to vulnerable populations into a bank account for state projects having nothing to do with health care.
"In fact, as I examine the current situation I am vividly reminded of the
Medicaid spending scandals we confronted 10 years ago when disproportionate share hospital program dollars were used to build roads, bridges and highways. Let me be very clear - this cannot be permitted to continue without endangering the program.
"The use of this complicated accounting mechanism may seem dry and technical - but let me assure you that the consequences are enormous. If unchecked, both the General Accounting Office and the Office of Inspector General at the Department of Health and Human Services agree that we face a situation that fundamentally undermines the fiscal integrity of the Medicaid program and circumvents the traditional partnership of financial responsibility shared between the federal and state governments.
"I have been advised that what states are doing through upper payment limits is technically not illegal. The states are taking advantage of a loophole in HCFA regulations. It is time to close that loophole fully.
"We must act because nearly 40 million of the neediest Americans rely on Medicaid for needed health care services. It is nothing short of a safety net. The program must not be undermined and weakened by clever consultants and state budgeteers. What looks like loopholes to some are holes in the Medicaid safety net for 40 million Americans.
"Several months ago, I began working with the Administration to respond to this scandal. We must stop it in its tracks -- while of course at the same time working thoughtfully and carefully with those states that have become dependent on the revenues generated through the use of upper payment limits to help them transition to a more sustainable payment relationship between the state and federal government.
"Finally, last week, after repeated delays, this Administration released its notice of proposed rulemaking - in a form much weaker than it originally intended when I first started working with HCFA on this problem last spring. The proposed regulation is inadequate. Instead of stopping a burgeoning Medicaid spending scandal, the proposed regulation looks the other way and tolerates the abuse of the program.
"The proposed regulation permits facilities to be reimbursed for providing services at a rate one and a half times what Medicare would have paid for a given service. Then states are free to pocket the difference between that payment level and the often much lower Medicaid payment rates through intergovernmental transfers. Not only does the regulation allow those who are exploiting the program to continue to do so, it also invites all others to come in and help themselves. The regulation permits the scam to continue while only modestly attempting to contain its magnitude.
"Simply containing wasteful spending is not sufficient. The American taxpayer who pays the bills should not stand for it, nor should the beneficiaries who depend on the program. In fact, the Center on Budget and Policy Priorities, whose advocacy on social policy issues is well-known, agrees that the scam must be shut down or the long-term health of the program will be jeopardized.
"Not only does the proposed regulation fail to protect the financial integrity of the Medicaid program, it also has a very low probability of ever being implemented. There is virtually no chance this Administration will be able to finalize the proposed regulation before it leaves office in January. Until the regulation is finalized, nothing changes. No abuser state has to modify its behavior one bit, and more and more states will be under pressure to take advantage of the windfall their neighbor states are enjoying. If anything, the White House action may spur greater abuse in the Medicaid program.
"The Congressional Budget Office estimates that truly solving the problem will save taxpayers $127 billion over the next decade. The stakes are high and we owe it to the 40 million Medicaid beneficiaries to protect the program so it remains strong and viable for the years to come.
"Accordingly, today I am introducing legislation that does what HCFA should have done but failed to do. My bill does not sanction abuse - it stops it. It closes the loophole, and treats non-state governmental facilities the same way state facilities are already treated. For those states with upper payment limits approved by HCFA already in place, it gives them two years to fully transition into compliance with the law. But no longer will schemes to exploit federal funding be tolerated. Even if HCFA is willing to look the other way, I am not. We must think about the long-term interests of the program and act now to stop the abuse. We should save the safety net for those that depend on it and save $127 billion over the next decade for the American taxpayer at the same time."
The savings from this bill are significant. The savings from this bill alone could pay for S. 3016, the "Medicare Temporary Drug Assistance Act of 2000,"a low-income, state-based Medicare prescription drug proposal introduced by Senator Roth, and S. 3165, the "Medicare, Medicaid and SCHIP Improvements Act of 2000," introduced by Senator Roth and Senator Moynihan last week, a bill that reduces beneficiary costs and improves prevention benefits; improves payments for health care services of Medicare and Medicaid providers; and addresses the needs of lower-income individuals and children.
The legislative language will be available on the Finance Committee Website later today.
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