State's Medicaid program could lose $260 million

ANDERSON -- The state's Medicaid agency could lose $260 million in federal funds.

That problem, tied to tougher federal interpretations of how to reimburse hospitals, looms as legislators grapple with a $350 million projected budget shortfall.

The issue involves what's known as "disproportionate share" money. Those funds go to hospitals based on their Medicaid patient caseload to make up for reimbursement levels below what private-sector insurers pay.

South Carolina put $113 million into a disproportionate share fund this year and the Centers for Medicare and Medicaid Services matched that with $262 million.

But now the federal agency is changing how it interprets what can be matched.

States have defined which hospitals meet broad definitions to get around a $50,000 cap on private-facility contributions. That helped the state get more federal matching money.

The Centers for Medicare and Medicaid Services "encouraged the methods we were using," Robert Kerr, director of the state Health and Human Services Department, said. But under tighter Bush administration interpretations, the federal agency has refused to pay matches in some cases.

For instance, the biggest battle here so far involves the definition of a county-run hospital. The agency is withholding a $20 million match for Palmetto Richland in Columbia.

The federal agency also has refused to pay $3 million to the Medical College of Georgia hospital, which serves Aiken-area patients. Because federal Medicaid rules require border-community hospitals to treat patients within 25 miles of their doors, states have long argued that hospitals doing that work should be reimbursed for their out-of-state patients.

The Centers for Medicare and Medicaid Services also has cracked down on matched money being recycled and matched again.

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