PENNSYLVANIA State's proposals to obtain Medicaid funds hit hurdles

Requests for funds are getting strengthened scrutiny, officials say.
HARRISBURG (AP) -- The administration of Gov. Ed Rendell is running into obstacles as it seeks to qualify for about $450 million in federal Medicaid dollars that would help subsidize nursing homes' treatment of the poor and insurance costs for physicians.
The federal government told state officials it likely would reject their strategy for obtaining a state share for Medicaid money by charging nursing homes and then redistributing the combined pool of money to the homes, officials said.
State officials said they hope to develop a revised strategy in the coming months that will qualify.
In addition, a Rendell administration proposal last year to request as much as $110 million in Medicaid funds to help pay the cost of malpractice claims against physicians is still on the drawing board because officials have not come up with a rationale they think the federal government would approve.
"We are still working at trying to figure out a way to get some federal money into that program," said David S. Feinberg, a deputy secretary for the state Department of Public Welfare. "It's just been challenging."
At issue
Feinberg said the challenge will be convincing the federal government that paying for physicians' malpractice insurance premiums helps pay for treatment of the poor. He acknowledged the difficulty of the task and said the administration plans to hire consultants to refine its arguments.
Some analysts say states are increasingly looking for new ways to qualify for Medicaid dollars as an economic downturn has cut into revenues while driving up demand for services to the poor. In response, the Bush administration has begun to scrutinize the plans closely to ensure that the states are sticking to the spirit of Medicaid regulations, they said.
"When things get tight, you look at things you haven't looked at before," said Charles A. Miller, a Washington, D.C., lawyer who has been contacted by the Rendell administration for help on the Medicaid matter. "And as things come forward, the federal agency is taking an extremely cautious look at them."
Created in 1965 to help states pay for medical and long-term care for the poor, Medicaid serves tens of millions of low-income Americans. In the fiscal year ending Sept. 30, 2002, the states and federal government paid $258.2 billion to HMOs, hospitals and other care providers.
Of the $50 billion that Pennsylvania expects to spend next fiscal year in combined federal and state funds, more than one-fifth would be spent on Medicaid patients. If the state does not get the extra Medicaid money for nursing homes, Rendell has said that state funding to the homes would be cut by 7.6 percent, or about $360 million.
Should nursing homes have to weather that kind of funding drop, "you'd see facilities close, you'd see employees let go or have benefits cut, and you'd see residents relocated to other facilities," said Alan Rosenbloom, president of the Pennsylvania Health Care Association, which lobbies on behalf of more than 300 nursing homes and assisted-living facilities.
The proposals
Rendell's plan, which he unveiled nearly a year ago, calls for the collection of $252 million from 601 nursing homes to qualify for $344 million in Medicaid funds. The combined $596 million would then be redistributed back to the nursing homes that paid the assessment.
The federal government objected to the strategy because the criteria the state proposed to determine how much to assess each nursing home was too similar to the criteria to redistribute the funds, Feinberg said.
A senior aide to the state Senate Republicans said he was optimistic that the state would eventually qualify for the nursing-home dollars. But he was less upbeat about the Democratic administration's chances of getting the funds for physicians' insurance claims.
"We've been skeptical about this idea from the beginning," said J. Andrew Crompton, counsel to Senate President Pro Tempore Robert C. Jubelirer, R-Blair. "Nothing that we've heard has indicated to us anything other than this program may never get off the ground. We're hopeful that it does."
The Rendell administration has made arrangements -- including raising the state cigarette tax -- to pay $220 million both this and next year for physicians' insurance costs. It had hoped to augment the cigarette-tax revenue with the Medicaid money.