June 30,2000

Roth Warns of Multi-Billion Dollar Medicaid Payment Scheme

Asks for Answers and Action from HHS; Asks Govt Watchdog to Investigate

WASHINGTON -- Senate Finance Committee Chairman William V. Roth, Jr. (R-DE) today warned that tens billions of Medicaid dollars are being bilked from federal taxpayers to fill holes in many states' budgets. Roth has asked the General Accounting Office to investigate, and has asked Health and Human Services Secretary Donna Shalala to act to stem the flow of federal dollars.

"Of late, I've become very concerned that unless the Administration acts immediately, we are on the brink of a spending scandal unlike any we have seen since Medicaid was used to pay for roads, bridges, and highways," Roth stated in a letter to Shalala.

"Medicaid is intended to provide health care to eligible vulnerable populations. It is not intended to serve as an accounting gimmick to funnel increased federal payments to the states," Roth stated.

Specifically, there is a loophole in Medicaid regulations that allows states to use "upper payment limits" to maximize the draw down of federal Medicaid funds in a way that bypasses traditional Medicaid matching rates - causing the federal government to pay more and state and local governments to pay less. Some states are using Medicaid to fill in holes in their budgets.

Through this complicated accounting mechanism, the federal government is

essentially using higher Medicare reimbursement rates to pay for health care services provided in many hospitals and nursing homes, but the states are only allowing the facilities to keep the often much lower Medicaid payment rate for the same services. The state can then pocket the difference between the Medicare and Medicaid rate.

Letters to Shalala and the GAO are attached.