CHICAGO -- Illinois Gov. Jim <

Edgar yesterday announced a plan to fill a potential $735 million gap in the state's budget for health care.

The deficit is expected to occur <

when a federal rule governing a Medicaid matching funds program changes in October.

The governor proposed assessing <

all health-care institutions in the state to raise the money to retain the federal matching funds.

Under the current hospital assessment <

plan, hospitals providing Medicaid services are taxed by the state for funds that are matched by the federal government. Participating hospitals then receive back from the state the amount they are assessed, plus a portion of the federal matching funds, according to Dean Schott, director of communications for the state Department of Public Aid.

Last December, President Bush <

signed legislation that tightened the restrictions on how states can garner revenues to apply to the federal Medicaid matching fund program. The law said that, beginning Oct. 1, states would be eligible for the matching funds as long as the tax applies to all providers, whether or not they provide Medicaid services.

Gov. Edgar's proposal would <

raise the $735 million in matching funds from all hospitals, nursing homes, and facilities for the developmentally disabled in the state.

Though all medical institutions <

in the state would be assessed under Gov. Edgar's proposal, more than 80% would benefit from the matching program, Gov. Edgar said.

"Most of the facilities that do not <

benefit are doing very well financially and should be able to pay their assessments without raising rates on their patients," he added.

The governor said he had spoken <

with legislative leaders and was hopeful his plan would be approved by the legislature.

"I expected opposition to my proposal," <

said Gov. Edgar. "But what are the alternatives? We could have $735 million in federal funds go to other states. Or cut reimbursement payments to providers by 30% and seriously jeopardize medical services to the poor. Or we could increase the state income tax. I reject all of these proposals."

Gov. Edgar said it was essential <

that the General Assembly approve the plan before the legislative session ends June 30 because the federal rules governing the Medicaid matching fund program go into effect Oct. 1. The legislature will be in recess until November.

The Illinois Hospital Association <

yesterday opposed the governor's proposal, saying that as many as a dozen hospitals in the state could go into bankruptcy within 18 months of the plan's implementation.

Federal officials last week rejected <

a proposal by the hospital association that would have allowed the state one more year of federal matching funds. The plan would have involved early payments of all currently required hospital assessments for fiscal 1993 before the present assessment plan expires Oct. 1.


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