WASHINGTON -- The Bush administration said yesterday it will grant states, on a case-by-case basis, a six-month delay of the Jan. 1, 1992, effective date for rules disallowing certain types of state funds that have been eligible for federal matching dollars under the Medicaid program.
"We believe this grace period will be sufficient to enable any state to transition out of these arrangements and to put in place alternate means of financing its Medicaid program," the Health Care Financing Administration said in its announcement.
But for a state to be eligible for the postponement, it must adhere to a set of conditions that several health lobbyists said would be difficult, if not impossible, to meet.
The announcement by the health administration, an agency within the Department of Health and Human Services, comes as the house Energy and Commerce Committee prepares to vote today on legislation that would grant a blanket postponement of the controversial rules until Oct. 1, 1992. Lawmakers have urged the administration, without success, to withdraw the rules.
The administration's announcement, as expected, also clarified several points within the regulations, which were published on Sept. 12 and have generated a storm of controversy among states.
The rules will require the federal government to stop matching the portion of states' Medicaid funds garnered through donations, and they will place tight new restrictions on the types of state taxes that can be counted toward the federal match.
Specifically, the health administration wants to clamp down on what it calls provider-specific taxes -- taxes levied on health-care facilities -- because those revenues are often funneled back into the medical community in the form of higher Medicaid payments.
During a briefing yesterday, Gail R. Wilensky, the head of the health administration, repeatedly declined to specify how broad a provider-specific tax would have to be to avoid violating the rules. Her remarks seemed to indicate that whether a certain tax ran afoul of the rules depended on how much of it was returned to the facilities on which the tax was levied.
For example, Ms. Wilensky said a state that levied a tax on the richest hospitals and distributed that money to poorer hospitals would be allowed to count the revenues from that tax toward the Medicaid match.
States have been arguing that the regulations will create serious problems because they will become effective in the middle of most states' fiscal years. States have already counted on receiving a certain amount of Medicaid money this fiscal year from the federal government, and if some of that money is not forthcoming, it will exacerbate many states' already precarious budget situations.
The health administration said yesterday it would grant a six-month postponement in the effective date to any state meeting the following conditions:
* The state submit by Jan. 2, 1992, an application "setting forth the state's plan for eliminating the use of [provider-specific] taxes and donations for the state share of Medicaid expenditures";
* The state agrees in writing to implement that plan through changes in state regulations or state law;
* The necessary legislation or regulation is in place by July 1, 1992.
Ms. Wilensky said during a press briefing that the postponement of the regulations for any given state hinges on the state's ability to enact the needed legislation or regulations. If a state tries but fails to do so by July 1, 1992, the administration will retroactively disallow 1992 donations or provider-specific taxes the state had used to count toward the Medicaid match.
The clarification issued by the administration was designed mainly to clear up confusion as to whether transfers of money between a state government and a city or county government would still be eligible for federal match funds under the new regulations. Ms. Wilensky has said some states were concerned the rules mandated a blanket prohibition against those intergovernmental transfers, which she said is not the case.
But transfers will be prohibited if they "mask" hospital donations, which are disallowed under the rules. For example, if a county transfers money to the state government that it received as the result of a hospital donation, that transfer would not be eligible for matching funds.
When asked how transfers from hospital districts or hospital authorities would be treated, Ms. Wilensky said the administration "is encouraging states to come in and talk with us" about their specific situations. She did not say those transfers would be disallowed but did say the agency "is concerned about them."
One of the criticisms leveled at the health administration has been that its rules have gone beyond congressional intent, particularly in the area of provider-specific taxes. Ms. Wilensky said yesterday that, while the agency "is not backing off at all" in forging ahead with the rules, it is beginning to negotiate with Capitol Hill on legislation that would make some of the changes embodied in those rules.
"We regard legislative change as the better way to fix some of this," she said. But if the administration and Congress cannot agree on the best way to proceed legislatively, the regulations slated to go into effect Jan. 1 are "what we well may end up living under."
