Veterinary Medicine

Washington -- Three Bush administration rules limiting federal Medicaid spending will go into effect on April 1 without action by Congress and the Obama administration, but three others could be rescinded by the new administration alone -- including a rule ending federal funding for graduate medical education.

The six rules are part of a Bush administration effort to scale back the federal government's Medicaid obligations so the program covers only what President Bush contends is required by law. The new policies would reduce federal spending by at least $12.4 billion over five years. Health care organizations affected by the reductions have argued that the White House and the Centers for Medicare & Medicaid Services are overstepping their authority.

Citing a need to review the changes further and maintain services, Congress in late June 2008 placed a moratorium on the six rules until April 1. A seventh Medicaid rule narrowing the scope of outpatient hospital services eligible for federal funds was published as a final rule in early November 2008. It is not covered by the moratorium.

Three of the six rules could be withdrawn by the Obama administration without action by Congress because they are only in proposed form, according to Charles Luband, an attorney for the National Assn. of Public Hospitals and Health Systems. One of those rules would end federal Medicaid GME funding, a move that would cut at least $1.3 billion worth of medical education funding over five years.

"Those can easily be blocked by the new administration just by either withdrawing the proposed rules or by not finalizing them," Luband said. The moratorium also prevents CMS from finalizing the three proposed rules before April, said CMS spokesman Peter Ashkenaz.

The three rules that already have become final but are not in effect can be reversed without action from Congress if the Obama White House goes through the entire rulemaking process all over again, Luband said. But the administration would need at least 90 days to do this and thus could not finish before the moratorium expires on April 1, he said. Those rules could be delayed further or reversed at any time if Congress is able to approve a new measure that receives the new president's signature.

Not a done deal

Opponents of the graduate medical education cuts and the other Medicaid restrictions are hopeful that one of those scenarios will play out in a way that results in the rules being blocked. President-elect Barack Obama has said he supports expanding Medicaid, not cutting it.

But the Assn. of American Medical Colleges is not assuming that the incoming president will rescind the GME rule, said Karen Fisher, the senior director of the AAMC's health care affairs division. "We certainly would hope that the new administration would see the value of making these [GME] payments and not finalizing the proposed rule," she said.

A Medicaid rule narrowing the scope of hospital outpatient services went into effect in November 2008.

Former Sen. Tom Daschle, Obama's nominee for Health and Human Services secretary, has not indicated a position on the GME cuts or the other Medicaid rules. An Obama transition team spokeswoman did not respond to requests for comment.

Rep. Henry Waxman (D, Calif.), the new chair of the House Energy and Commerce Committee, said states can't afford to sustain the billions of dollars in funding cuts. "To allow these regulations to take effect in the midst of the worst recession since World War II would be economic suicide," he said.

The rules would devastate the Medicaid safety net, said Greg Morris, executive director of LEAnet, a network of local education agencies that supports school health programs. "We would lose the ability to provide health services for children and disabled Americans of all ages," Morris said.

LEAnet wants Congress and Obama to extend the moratorium on the Medicaid rules until Oct. 1, the beginning of fiscal year 2010, to review them and take more public comments. The network has been alerting Obama's transition team about the problems the regulations would cause. "All we're asking for is maintenance of the status quo," Morris said.

Luband, with the National Assn. of Public Hospitals and Health Systems, said Congress likely does have reservations about the policy changes because lawmakers already have adopted a moratorium on the rules. "I'm certainly hopeful that some combination of Congress and the [Obama] administration will deal with all of these rules appropriately."

Healthy workload

The Medicaid rules are only one of several health system reform issues facing Obama and the new Congress in their first months of work this year.

The State Children's Health Insurance Program will expire on March 31 without a reauthorization. In addition, Congress and Obama are in the midst of determining what should go into an economic stimulus measure that could cost hundreds of billions of dollars and include a temporary increase in federal Medicaid funding.

Lawmakers, most notably in the Senate, also have begun writing comprehensive health system reform legislation.

On top of all this, the Obama administration must decide what to do about an SCHIP directive that went into effect on Aug. 17, 2008, that largely restricts federal funding to enrollees in families earning less than 250% of the federal poverty level. Although CMS so far has not enforced the directive, it is still official program policy.

Obama could rescind that directive immediately on his own, said Dennis Smith, former director of CMS' Center for Medicaid and State Operations and a senior fellow at the Heritage Foundation in Washington, D.C.

In reauthorizing SCHIP, Democrats in Congress must decide whether to reintroduce the $35 billion SCHIP expansion that Congress passed and President Bush vetoed in 2007 and 2008, or to craft a new bill.

The American Academy of Pediatrics supports SCHIP but favors the MediKids Health Insurance Act, according to a Jan. 6 letter by AAP President David T. Tayloe Jr., MD. That bill, sponsored by Rep. Pete Stark (D, Calif.), would create a program similar to Medicare, with a prescription drug benefit for children.

The print version of this content appeared in the Jan. 19, 2009 issue of American Medical News.

A recent California trial court ruling could help extend Medicaid coverage to hundreds of HIV-positive patients in the state.

A Los Angeles Superior Court judge chastised the state for failing to implement a 2002 law intended to close a gap in the state's Medicaid regulations preventing HIV-positive patients who met federal income requirements from qualifying for the benefits until they developed AIDS.

The Legislature had directed the Dept. of Health Care Services to encourage Medicaid patients with AIDs to switch voluntarily from the state's fee-for-service plan to a less costly Medicaid managed care network. The savings generated by the re-enrollments were to be used to fund coverage for new HIV patients in a budget-neutral manner.

In a decision Nov. 25, 2008, however, Judge James C. Chalfant found that health officials had abandoned their statutory obligations to carry out a number of steps required to institute the program and ordered the state to comply with the law, which took effect on Jan. 1, 2003. Final approval of the order came on Dec. 17, 2008. The Dept. of Health Care Services must report its progress to the court within 120 days of the final order. The California Medical Assn. supported the law but was not involved in the case.

Because the state sat on the statute for nearly six years, hundreds or possibly thousands of HIV-positive patients were deprived of necessary care through Medi-Cal, said Tom Myers, general counsel to the AIDS Healthcare Foundation. The global advocacy and health care service organization filed the lawsuit against the state.

Because HIV-positive patients were unable to receive coverage until their health had deteriorated into full-blown AIDS, the costs and complexity of care were much higher, Myers said.

The state "simply decided this was not going to work without doing any work," he said. "We know people can benefit from this [program], and it's incumbent on the state to obey the law ... and start providing care."

The Dept. of Health Care Services said it plans to follow the court's order. But the agency maintains that it did its job and simply could not make the math work.

"The law was very clear that it should not be implemented if the costs could not be offset by the savings," said DHCS spokesman Anthony Cava. "Unfortunately, due to the higher costs of some managed care plans, we could not demonstrate that to the federal government's satisfaction." But the court determined that the state made little effort to affirm that conclusion and fell short on several requirements outlined in the law.

Aside from two meetings with HIV/AIDS advocates and a flier mailed to Medicaid recipients in only three counties, health officials "undertook no direct outreach or awareness activities to encourage Medi-Cal recipients with AIDS to explore the managed care option" as mandated, Chalfant wrote. He also rejected the state's contentions that a lack of funding and confidentiality concerns posed barriers, saying there was no evidence to back such claims.

Before the bill passed, the Dept. of Health Care Services had estimated that roughly 20 AIDS patients would need to transfer to Medicaid managed care to defray the cost of one HIV-positive enrollee, according to court documents.

But in its analyses, the agency failed to establish a capitation rate for HIV-positive patients or accurately track AIDS patients transferring into managed care to determine the true level of potential savings, the court said. Nor did the health department follow up on the federal government's request for additional financial data after receiving the state's initial waiver application for the Medicaid expansion.

The AIDS Healthcare Foundation's Myers estimated that his organization's own managed care program could have saved the state $2 million between 2003 and 2007. "We know the money is there," he said, adding that at least 20 other managed care plans in the state cover AIDS patients on Medicaid.

In addition, nothing in the law prevented health officials from looking to other revenue sources to meet the cost-neutrality requirements, but the state "actively rejected" such options, the court said.

The print version of this content appeared in the Jan. 19, 2009 issue of American Medical News.

In an effort to rein in health care costs, Massachusetts health officials have toughened their certificate-of-need requirements, including new rules for physician-owned ambulatory surgical centers.

The state's Dept. of Public Health approved amendments to the state's CON law that require single-specialty surgery centers to demonstrate a community need before getting state approval to open a new facility. The physician-owned centers previously were exempt from the process, which largely regulated hospital projects.

The rules, which took effect last month, exempt existing ambulatory surgical centers. Hospital outpatient projects costing more than $25 million also must submit to the determination of need process.

The regulations were part of a health care cost-containment measure Gov. Deval L. Patrick signed in August 2008 to boost the state's universal coverage initiative. They came amid continued criticism from the U.S. Justice Dept. and organizations such as the AMA that CON laws have failed to keep health care costs down and that they stifle competition and access to low-cost, high-quality care.

Hospital organizations have argued that when unchecked, doctor-owned facilities select the more profitable patients, leaving community hospitals with burden of unprofitable emergency or charity care.

36 states have CON laws.

Thirty-six states and the District of Columbia have CON laws. Massachusetts is among about a dozen states that amended statutes in the past year because of the cost and access debate.

The changes were intended to "level the playing field" between hospitals and doctor-owned surgery centers, said Paul I. Dreyer, director of the Bureau of Health Care Safety and Quality at the Dept. of Public Health. "What this is doing is taking private corporate decisions that affect the public in major way into the public arena ... where all of these [access to care] concerns are taken into consideration."

But the system provides only a Band-Aid solution to long-term-access issues, said Linda K. Rahm, president of the Massachusetts Assn. of Ambulatory Surgical Centers.

The new rules will allow approved single-specialty surgery facilities to accept Medicaid patients for the first time. Because the centers were exempt from the CON process, they were not eligible for state licensure and, as a result, could not treat Medicaid patients. But the rules could stymie growth of important new facilities, Rahm said. They also continue to ban multispecialty centers.

"If we want to provide less costly and more affordable quality care, we should be looking at alternative options, and we are limiting those options through the whole determination-of-need process," she said.

The Massachusetts Medical Society has not taken a position on the issue. President Bruce S. Auerbach, MD, said MMS supports state efforts to curb costs and cut unnecessary duplication of services.

"As long as we continue to look at small pieces of the health care system, there's more work to be done," Dr. Auerbach said. "We should be taking a look at the broad needs of the population and make sure we can provide access and respond appropriately with available technologies."

The Massachusetts Hospital Assn. supported the changes but recommended monitoring. "It's important for the state to make sure there are enough resources committed to keep the process moving expeditiously and to ensure that access is maintained," MHA counsel Anuj K. Goel said.

The print version of this content appeared in the Jan. 19, 2009 issue of American Medical News.