December 20, 2004

Administration Looks to Curb Growth of Medicaid Spending
By ROBERT PEAR

WASHINGTON, Dec. 19 - Federal officials are sending auditors to state
capitals across the country to investigate techniques used by states to
shift hundreds
of millions of dollars in Medicaid costs to the federal government.

Also, under a proposed federal rule, the Bush administration will require
states to prepare annual estimates of total improper payments and calculate
payment
error rates for Medicaid and the State Children's Health Insurance Program.
States will have to identify the cause of each error, address it and recover
any overpayments to health care providers.

The moves come as the administration is considering a wide range of other
new initiatives to curb the growth of Medicaid spending, crack down on
improper
payments and help states save money by restricting eligibility and benefits.

Federal investigators said Medicaid wasted hundreds of millions of dollars a
year by overpaying for prescription drugs. Many states pay on the basis of
inflated, fictitious list prices reported by drug companies. One of the
initiatives would link payments to actual market prices, which are often
much lower.

Federal health officials said the nomination of Michael O. Leavitt as
secretary of health and human services signaled the administration's desire
to make
big changes in Medicaid, like those Mr. Leavitt made as governor of Utah.

Under one proposal, states would be allowed to make many changes like
increasing co-payments and limiting eligibility without having to get
federal waivers.
Local officials would also be allowed to provide different benefits in
different parts of a state.

Such plans will stir impassioned debate in Congress. In a letter to
President Bush last week, 47 Democratic senators expressed "opposition to
any Medicaid
reform proposal that seeks to impose a cap on federal Medicaid spending in
any form or eliminates the fundamental guarantee to Medicaid coverage for
our
nation's must vulnerable citizens."

Medicaid is financed jointly by the federal government and the states. Gov.
Mike Huckabee of Arkansas, a Republican who is vice chairman of the National
Governors Association, said, "None of us could live with 10-year caps on
spending" of the type favored by the Bush administration. If federal
spending
is capped and the number of Medicaid recipients increases sharply, Mr.
Huckabee said, states will face dire fiscal problems.

But he said, "We would like to see the federal government give us more
authority and power to control the costs and utilization" of health care
under Medicaid.

The Bush administration and senior Republicans in Congress said they were
developing proposals to do just that. States, for example, would be allowed
to
charge higher fees to higher-income people.

Medicaid, originally intended for the poor, has been expanded in some states
to cover families with incomes up to twice the poverty level. But the limit
on co-payments is still $3 for a prescription drug, regardless of a family's
income.

Lawmakers have talked of overhauling Medicaid for a decade, but a confluence
of forces has added new urgency to the debate, which will begin in earnest
when Congress convenes next month.

Medicaid spending shot up 63 percent in the last five years. With more than
50 million beneficiaries and more than $300 billion a year in combined
federal
and state outlays, Medicaid is now bigger than Medicare. For prescription
drugs alone, Medicaid spending soared to $34 billion in 2003, from $13.6
billion
in 1998.

Mr. Bush has vowed to cut the federal budget deficit by half in five years,
and Republican leaders in Congress say that goal will be virtually
impossible
without touching Medicaid. Gary R. Karr, a spokesman at the Centers for
Medicare and Medicaid Services, said the administration would work with
Congress
to come up with "a long-term solution that helps state budgets while
improving health outcomes for beneficiaries."

The growth of Medicaid has outstripped the growth of state revenues and is
putting pressure on other state programs. This year, for the first time,
Medicaid
was a larger component of state spending than elementary and secondary
education combined, the governors association said.

Court decisions have upheld the rights of Medicaid recipients to sue for the
denial of benefits, limiting the options for state officials who want to cut
costs.

"When we try to curb expenses, we inevitably get sued in federal court, and
we always lose," Mr. Huckabee said in an interview.

Several states have tried unsuccessfully to deny benefits to poor children.
Louisiana, for example, refused to cover disposable diapers prescribed by a
doctor for a 16-year-old boy with spina bifida who had no control over his
bowel or bladder. The United States Court of Appeals for the Fifth Circuit,
in New Orleans, ruled last month that the state had to cover such supplies
for children, regardless of whether they were available to adults.

Services for a child must be "determined by reference to federal law, not
state preferences," the court said. Under the law, it said, states must
cover
any services needed to correct or ameliorate conditions discovered through
medical screening of a child.

In examining how states may be shifting costs to the federal government, the
Bush administration contends, for example, that Massachusetts improperly
obtained
more than $580 million in federal Medicaid money without paying its share.
Gov. Mitt Romney, a Republican, met recently with Andrew H. Card Jr., the
White
House chief of staff, to defend the state's method of financing.

All state Medicaid programs cover prescription drugs. Federal Medicaid
officials said they were now willing to let states limit the number of
prescriptions,
and the number of pills per prescription, for adults. But, they said, such
limits cannot eviscerate the drug benefit, which under federal rules must be
"sufficient in amount, duration, and scope" to meet the needs of most
adults.

Federal officials pointed to Utah's Medicaid program as an example of the
kind of changes they would accept in other states. "That's the direction the
administration
wants to go," said a federal Medicaid official who spoke on condition of
anonymity because the administration is still working out details of its
plan.

As governor, Mr. Leavitt obtained a federal waiver allowing Utah to provide
Medicaid coverage to more people at no additional cost to the federal
government.
To accomplish that feat, the state reduced benefits for some people on the
rolls and provided a limited set of benefits to new recipients. The new
group
got coverage for primary care doctors and four prescriptions a month, but
the benefit package did not include hospital care or mental health services.

Medicaid is now an entitlement, guaranteed to anyone who meets the federal
and state eligibility criteria.

In 1995, Congress passed a bill to end the individual entitlement and let
each state devise its own program with a lump sum of federal money. Lobbying
for
that proposal, Mr. Leavitt, who was then chairman of the Republican
Governors Association, said, "We are unanimously opposed to inclusion of
individual
entitlements" in the Medicaid bill. The bill was part of a deficit-reduction
measure vetoed by President Bill Clinton.

The Bush administration is working with Congress to limit Medicaid payments
for prescription drugs. Representative Joe L. Barton, Republican of Texas
and
the chairman of the Committee on Energy and Commerce, said: "The current
system is broken and needs to be fixed. The government reimbursement rate
has
to be based on an actual price that somebody pays, not just a posted price,
a sticker price."

Patrick J. O'Connell, an assistant attorney general of Texas, said some
pharmacies had received "windfall profits" because Medicaid had paid them
far more
than it cost to buy drugs from manufacturers and wholesalers. Moreover, Mr.
O'Connell said, some manufacturers "purposely reported false and inflated
prices
to Texas Medicaid."

Two drug companies have paid the state $45 million to settle Medicaid fraud
charges.

Copyright 2004

Posted by Miriam V