ANNAPOLIS -- With Maryland already facing a $300 million budget deficit, the federal government is threatening to deny the Schaefer administration's bid for an additional $55 million in federal Medicaid funds.
State officials tried to increase Medicaid reimbursements this year by adding a "tax" to the fees charged by doctors in the program. Since Washington covers half the cost of the fees, raising them would increase the federal reimbursement.
The Maryland plan was simple: A $20 doctor fee could be doubled. Doctors would get none of the additional money. The state would keep it all to pay for the expanding Medicaid program.
The question, though, was this: Did the tax represent a real and reimburseable cost or was it a way to make costs appear higher and thereby leverage more federal money?
Washington's answer was not long in coming.
As soon as the plan was put in place on July 1, the federal Health Care Financing Administration (HCFA) began to withhold that part of the reimbursement it deemed improper -- $13 million so far.
The Office of Management and Budget and the Department of Health and Human Services are now saying that 23 states, including Maryland, have used tax-reimbursement plans and similar "sleight of hand" schemes to create a $3.8 billion raid on the federal treasury.
New regulations designed to block these revenue enhancement plans are scheduled for release soon. The new rules apparently would go into effect Jan. 1 and they could have an immediate impact in Maryland.
OC The state would be halfway through the current fiscal year, one
in which revenues are already projected to fall far short of those anticipated when the budget was balanced.
The proposed regulations promise another skirmish between the states and the Bush administration, with the Democratically controlled Congress weighing in, as it has before on this issue, on the side of the states.
Until this year, the various approaches to increasing federal reimbursements had not been a major factor in overall Medicaid cost increases. Now as more and more states adopt such plans, Washington is acting to control Medicaid costs and to keep its own deficit from growing.
Richard P. Kusserow, inspector general of the Department of Health and Human Services, told the Washington Post this week that the states' schemes could cost the federal treasury $12 billion by the end of fiscal 1993.
Medicaid is a broad and expanding health care safety net for 27 million poor Americans -- half of them children. Its upwardly spiking costs have alarmed government officials at every level.
In fiscal 1990, the Medicaid bill was $71 billion. It is expected to reach $150 billion by 1995 and could be more than $200 billion by 1996.
Medicaid covers general hospital and physician services as well as prenatal and child care, long-term care for people who are elderly or disabled and, in Maryland, kidney dialysis.
The author of the Maryland plan, state health secretary Nelson J. Sabatini, called his approach "creative financing." Others in the Schaefer administration quietly called it "The Scam" and "Fool the Feds."
Gail R. Wilensky, administrator of HCFA, said in February that what she had heard of the Maryland plan made her want to investigate it more carefully.
"Our concern is that federal matching dollars go to something legitimate -- not some quick shuffle of funds. There's a lot of concern if this is not responded to, you could have money chasing itself around picking up federal dollars in a very serious manner," she said.
Ms. Wilensky declined to discuss the new rules until they are officially released.
But Ann L. Rasenberger, an assistant attorney general in Maryland, says a draft of the new regulations sent to her by HCFA would make Maryland's plan illegal.
She says, however, that the state still thinks its tax on doctor fees is consistent with a 1990 federal law explicitly designed to help states meet their Medicaid costs.
Gov. William Donald Schaefer was openly skeptical of the Maryland plan, as were various legislators -- despite assurances from Attorney General J. Joseph Curran Jr. and others.
The state has not decided whether to file suit, Assistant Attorney General Rasenberger said. But that option is being considered even before the new rules are officially released. A number of interested parties might join the state in a lawsuit, including the National Governors Association and the NationalAssociation of Attorneys General.
"You can believe that with the billions of dollars at stake, the states won't take this laying down," Ms. Rasenberger said. In Governor Schaefer's office last week, the federal actions are causing great concern.
"Obviously we'd counted on the money. We're at a loss to come upwith the resources," said Paige Boinest, a spokeswoman for the governor.
Some states have managed to cover up to 100 percent of their Medicaid programs by employing variations of the theme, many pre-dating the one in Maryland.
"Maryland is a piker compared to some," Ms. Rasenberger said.
If the states' arguments fail to save these financing methods, new laws may be needed, according to Sen. Wyche Fowler Jr., D-Ga. He has offered legislation that would continue the matching programs but limit them to 10 percent of a state's costs.