New York Times Article re Medicaid

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******************The New York TimesDecember 20, 2004

Administration Looks to Curb Growth of Medicaid SpendingBy ROBERT PEAR

Federal officials are sending auditors to state capitals across thecountry to investigate techniques used by states to shift hundreds of millionsof dollars in Medicaid costs to the federal government.

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

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

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

Federal health officials said the nomination of O. Leavitt assecretary of health and human services signaled the administration'sdesire to make big changes in Medicaid, like those Mr. Leavitt made asgovernor of Utah.

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

Such plans will stir impassioned debate in Congress. In a letter toPresident Bush last week, 47 Democratic senators expressed "oppositionto any Medicaid reform proposal that seeks to impose a cap on federalMedicaid spending in any form or eliminates the fundamental guarantee toMedicaid 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 theNational Governors Association, said, "None of us could live with 10-year capson spending" of the type favored by the Bush administration. If federalspending is capped and the number of Medicaid recipients increasessharply, Mr. Huckabee said, states will face dire fiscal problems.

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

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

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

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

Medicaid spending shot up 63 percent in the last five years. With morethan 50 million beneficiaries and more than $300 billion a year in combinedfederal and state outlays, Medicaid is now bigger than Medicare. Forprescription drugs alone, Medicaid spending soared to $34 billion in2003, from $13.6 billion in 1998.

Mr. Bush has vowed to cut the federal budget deficit by half in fiveyears, and Republican leaders in Congress say that goal will be virtuallyimpossible without touching Medicaid. R. Karr, a spokesman at theCenters for Medicare and Medicaid Services, said the administrationwould work with Congress to come up with "a long-term solution that helpsstate budgets while improving health outcomes for beneficiaries."

The growth of Medicaid has outstripped the growth of state revenues andis putting pressure on other state programs. This year, for the firsttime, Medicaid was a larger component of state spending than elementary andsecondary education combined, the governors association said.

Court decisions have upheld the rights of Medicaid recipients to suefor the denial of benefits, limiting the options for state officials who wantto 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 poorchildren.

Louisiana, for example, refused to cover disposable diapers prescribedby a doctor for a 16-year-old boy with spina bifida who had no control overhis bowel or bladder. The United States Court of Appeals for the FifthCircuit, im New Orleans, ruled last month that the state had to cover suchsupplies 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, statesmust cover any services needed to correct or ameliorate conditionsdiscovered through medical screening of a child.

In examining how states may be shifting costs to the federalgovernment, the Bush administration contends, for example, that Massachusettsimproperly obtained more than $580 million in federal Medicaid money withoutpaying its share. Gov. Mitt Romney, a Republican, met recently with H. CardJr., the White House chief of staff, to defend the state's method offinancing.

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

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

As governor, Mr. Leavitt obtained a federal waiver allowing Utah toprovide Medicaid coverage to more people at no additional cost to the federalgovernment. To accomplish that feat, the state reduced benefits forsome people on the rolls and provided a limited set of benefits to newrecipients. The new group got coverage for primary care doctors andfour prescriptions a month, but the benefit package did not include hospitalcare or mental health services. Medicaid is now an entitlement, guaranteed to anyone who meets thefederal and state eligibility criteria.

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

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

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

Two drug companies have paid the state $45 million to settle Medicaidfraud charges. ****************************

FLORIDA'S VOICE ON MENTAL RETARDATIONc/o Arlene Lakin, Esq.President5591 N.E. 28th AvenueFort Lauderdale, Florida 33308Tel. Fax E-mail: FVMRorg@...Website: www.FVMR.org