Lawsuits raise states' costs for Medicaid services

October 29, 1991|By New York Times News Service

WASHINGTON -- Hospitals and nursing homes around the country are successfully suing states to force them to increase Medicaid payments to levels that more nearly reflect what it costs to treat patients.

The multimillion-dollar judgments, propelled by a 1990 Supreme Court decision permitting such suits, are severely straining the budgets of the federal and state governments, which jointly finance the program to provide medical care to low-income people.

Judges are finding that Medicaid payments to providers of health care do not meet the standard of "reasonable and adequate" compensation under the law.

Instead of reimbursing hospitals and nursing homes based on the costs incurred by efficient health care providers, states often base their payments simply on budget considerations, the courts say.

No such suits have been brought in Maryland.

According to a survey of hospitals by the American Hospital Association, on average, hospitals receive 78 cents for every dollar it costs to care for Medicaid patients. Judges have reached similar conclusions.

Federal and state spending for Medicaid has increased by several billion dollars a year as a result of court judgments, settlements and rate increases granted by states anticipating lawsuits.

Cost increases have been estimated at $62 million in Washington state, $120 million in Virginia, $65 million in Oregon and $90 million in Michigan.

State officials across the country say that the Medicaid increases come at a time when they are cutting other programs and raising taxes to eliminate budget deficits.

Specialists in health care warn that to offset the costs, some states might restrict Medicaid eligibility or cut back on optional services.

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