In response to Gov. Mark Sanford's budget released last week that proposed spending $7.8 million more in recurring state funds to boost Medicaid nursing home reimbursements next year, the nursing home industry reacted with disappointment.

The amount was not enough to keep homes from closing.

State officials have a different take. "No nursing home is going to close," said William Wells, deputy director of finance and administration for the state Department of Health and Human Services, which oversees Medicaid in the state.

Here's the problem: For the last two years, the state has boosted nursing home reimbursements by using a federal program that is similar to the disproportionate-share program that pays hospitals for the care of the poor.

The state collects funds from public nursing homes and uses them to draw federal Medicaid matching money, roughly more than 2-for-1. Those funds are then distributed to nursing homes to increase reimbursements without increasing state spending.

Like the disproportionate-share program, federal officials have come to dislike this idea. Unlike the disproportionate-share program, the government has already decided to get rid of it.

Randy Lee, director of the South Carolina Health Care Association, said that the state needs to find $21 million to make up for the loss of those funds, $14 million for the previous two years and $7 million for next year.

Lee said the governor's plan was about $13 million short. Without it, the state would lose those federal dollars, which would devastate nursing homes.

Wells, however, said that Lee is exaggerating the problem. He said that Lee is calculating the $21 million to give nursing homes a rate increase next year, so the state only needs to find $14 million to keep rates from being cut.

ASSOCIATION BLUES

The country's BlueCross BlueShield health plans are gearing up to fight one of President Bush's key health care proposals: association health plans.

Small-business groups have long been calling for association health plans, which would give them the ability to band together in associations to buy health insurance that would be exempt from state regulations.

They believe that freedom from regulation, and the ability to form larger groups, is key for them to control health care costs.

The BlueCross BlueShield Association opposes the idea. Last week, that association blasted the plans, which it says would result in higher premiums, more uninsured and more fraud and abuse.