First of Several Medicaid
Reform Hearings Focuses on IGTs
March 26, 2004 - Intergovernmental transfers (IGTs)
were the subject of discussion at a March 18 hearing
of the House Energy and Commerce Subcommittee on Health. The
hearing was the first of several expected to focus on potential
Medicaid reform strategies.
Representatives from the Department of Health and Human Services
(HHS) Office of Inspector General (OIG) and General Accounting
Office (GAO) testified that "new variations" of
Medicaid financing schemes continue to emerge despite efforts
to ensure that federal Medicaid payments are in "proper
proportion" to states' shares. In addition, the Medicaid
program continues to operate without assurances that federal
payments are used as intended. Centers for Medicare and Medicaid
Services (CMS) Assistant Inspector General George Reeb identified
hospital graduate medical education (GME) payments as one
of the areas under increasing scrutiny during state audits.
According to Mr. Reeb, CMS has identified six additional states
for upcoming Medicaid audits.
GAO Director of Medicaid and Private Health Insurance Issues
Kathryn Allen reiterated previous recommendations that Congress
limit Medicaid payments to the "reasonable cost of covered
services." Assistant Inspector Reeb agreed that payments
should be based on the cost of providing service.
The discussion of cost-based reimbursement included a reminder
by Ms. Allen that "there are other important public policy
objectives" achieved via Medicaid financing, including
graduate medical education and maintenance of a national healthcare
safety net. Ms. Allen advised "those types of costs are
considered to be legitimate and valid" and should "become
part of the cost basis."
During his testimony, Childrens Hospital-Los Angeles President
and CEO Bill Noce expressed concern that any initiative to
reduce federal Medicaid funding will result in "unintended
consequences." According to Mr. Noce, IGT mechanisms
generate about $35 million in annual Medicaid funding for
his hospital. Eliminating the funding would increase his hospital's
projected $25 - $30 million loss over the next few years to
$60 - $70 million. Mr. Noce warned that "[w]e don't believe
that we could survive as an institution" under those
circumstances. "[W]e would in effect close our hospital."
The Subcommittee anticipates a second Medicaid reform hearing
in mid-April.
Information:
Christiane Mitchell, Senior Legislative Analyst
AAMC Government Relations
cmitchell@aamc.org
(202) 828-0526
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