Annoyed at the federal government for changing the rules in the middle of the game, South Carolina officials in charge of the state’s Medicaid system are working to preserve more than $260 million in federal funding.
At issue is the way South Carolina - and many other states, Robert Kerr, state Department of Health and Human Services director, is quick to point out - gathers money required to get a federal matching grant in Medicaid’s disproportionate share program.
Disproportionate share money is used to reimburse hospitals based on their caseload of Medicaid patients, since Medicaid pays them lower rates than most self-pay and privately insured patients. South Carolina put up $113 million this year, matched with $262 million from the U.S. Centers for Medicare and Medicaid Services, Health and Human Services spokesman Frank Adams said.
The state’s contribution came from direct appropriations, large contributions from public hospitals and smaller contributions from private hospitals, up to $50,000 each.
All the state’s hospitals receive a portion of the total, which in the 2002-03 fiscal year was more than $375 million. Their share depends on their Medicaid caseload and other factors, such as status as a teaching hospital.
AnMed Health, for example, paid the full $50,000 as a private hospital in the 2002-03 fiscal year, and so far has received $14 million to cover some Medicaid charges, Chief Operating Officer Bill Manson said. About $4 million more is on hold as the state and federal Medicaid office work out the regulatory disputes.
"People look and say, ‘You send dollars off that get matched and come back.’ It looks like a windfall," he said. "The problem is, even with disproportionate-share program dollars, which help enormously, we still do not receive enough to cover Medicaid patients."
The result is rate hikes for individuals and other insurers to make up the difference.
When disproportionate share was developed in the early 1990s, it was left to states to define public hospitals, and many used broad definitions to get around the $50,000 cap on private-facility contributions, since the more money they piled together, the more federal money they received.
Until now, the Centers for Medicare and Medicaid Services "encouraged the methods we were using," Mr. Kerr said. "It is arguable that they are fine now."
But the Bush administration has tightened its interpretations of the regulations and the Medicaid office already has refused to pay the federal match for some contributions.
One issue is the definition of a county-run hospital. The biggest front in that battle is Palmetto Richland, for which the federal Medicaid office has withheld a $20 million match.
There also are differing opinions about rules for border hospitals. The federal government has refused to pay $3 million based on contributions to South Carolina from the Medical College of Georgia hospital, which treats many Aiken-area patients. The states argue that the disproportionate share program must operate on the same basis as the general Medicaid program, which is required to treat the Georgia hospital as in-state because it is within 25 miles of the border, Mr. Kerr said.
"We don’t want out-of-state facilities to stop seeing our patients," he said.
Another issue is "recycling" of disproportionate share money, where a hospital bounces already-matched money back to the state to boost what the state puts up for its federal match.
"They were well aware of everything we were doing, and it’s not unique to South Carolina," Mr. Kerr said. "It’s a national issue, and it’s a good bit of money here, but we’re not anywhere near the big spender many other states are."
He said the rule changes were brought on by abuses in others states not related to the source of state contributions, but how the matched funds were used.
He plans to attend meetings in a few weeks with federal officials as part of bureaucratic negotiations. Those officials appear to be willing to help states "transition to where we want to be," changing current practices into compliance without creating huge drops in Medicaid funding, he said.
"No matter what happens, there are other ways we can get money for the disproportionate share program," he said. "I would fall short of saying the program is in absolute jeopardy."
Kelly Davis can be reached at (864) 260-1277 or by e-mail at davisk@IndependentMail.com.
