WASHINGTON -- In a victory for states, the Bush administration has tentatively agreed to ease rules set to go into effect Jan. 1 that would severely limit the types of state funds eligible for matching federal dollars under the Medicaid program, the National Governors Association said yesterday.
But a major hurdle remains: For the looser regulations to take effect, Congress will have to pass legislation in the short time left before it adjourns for the year.
The governor's group acknowledged in a statement that if the legislation is not enacted by then, the Health Care Financing Administration still plans to put the tighter rules that were proposed Sept. 12 into effect on schedule.
Whether Congress will take action before the end of the year "is a major factor, a big 'if' at this point," said a lobbyist who asked not to be identified. "The situation is still very fluid."
For that reason, the lobbyist said, state and local officials are still supporting another bill pending in Congress, which would delay for nine months the Jan. 1 effective date of the tighter rules. That measure was overwhelmingly approved last week by the House Energy and Commerce Committee.
The health agency has agreed that if legislation providing for the looser rules is enacted, those rules would become effective July 1, 1992, according to the governors' group. The rules cannot be drafted without legislation because the changes agreed to by the health agency go beyond the scope of Medicaid financing legislation enacted in 1990.
Yesterday's announcement by the governors' group caps weeks of behind-the-scenes negotiations between the governors and the health administration over the proposed Medicaid financing rules, which have generated a storm of controversy. Those rules rules required the federal government, beginning Jan. 1, 1992, to stop matching the portion of states' Medicaid funds garnered through donations and placed tight new restrictions on the types of state taxes that can be counted toward the federal match.
In addition to those regulations, the health agency last month took two more controversial steps to restrict federal Medicaid payments to states.
First, the agency issued a clarification of the regulations that disallowed many types of transfer payments from other levels of governments to states from being counted toward the Medicaid match.
Second, the health administration proposed another set of rules, designed to close what it said were loopholes in current law. Those loopholes allow states to inflate the number of hospitals within their borders that treat an inordinate number of Medicaid patients and are entitled to extra Medicated payments -- so-called disproportionate-share hospitals, according to the agency.
The governors' group said yesterday it worked out agreements with the health agency in each of those areas, subject to congressional approval. The agency declined to comment, and the governors association refused to release details of those agreements because all the governors had not seen them.
But documents circulating within the hospital and municipal industries describe what tentatively was agreed to in each area. The health agency appears to have backed off completely on the issue of intergovernmental transfers, which would nullify the clarification it issued last month.
The agency also appears to be willing to rescind it proposal regarding disproportionate-share hospitals and to replace it with an overall cap on the amount of federal money states could receive for those hospitals.
The administration's ban on states' use of hospital donations to count toward the Medicaid match would remain in effect, but it backed off from its blanket ban on revenues from hospitals taxes, also known as "provider-specific" taxes.
According to the documents, the agreement on provider-specific taxes includes language stipulating that states may count those taxes toward the Medicaid match as long as the tax uniformly applies to all providers in a class and all business of those providers.
"Classes" of health-care providers would include, for example, all hospitals, all physicians, or all nursing homes practicing in a given state. A tax that applied to "all business" of a class of providers could be a gross-revenue tax, a tax based on all inpatient days, a head tax on all patients, or a tax on all beds, to name a few examples.
The agreement does not prevent states from reimbursing hospitals for the taxes levied on them, but it would block states from guaranteeing that such reimbursements would occur.
"While most states will have to make some adjustments to their current provider tax and/or donation programs under the terms of this proposed settlement, it would, if enacted, provide both a phased implementation period and clear statutory guidance on which governors and state legislatures could rely to develop new taxing programs," the governors' association said in its statement.