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While they support the notion of cleaning up the Health Care Financing Administration’s (HCFA) large backlog of plan amendments awaiting approval, states are protesting a Jan. 2, 2001, letter to state Medicaid directors from Tim Westmoreland, Medicaid director.
The letter explained that HCFA is changing its process in dealing with plan amendments, including prohibiting drawing down federal financial participation (FFP) until amendments are approved.
David Parrella, medical care administration director for the Connecticut Department of Social Services, tells State Health Watch the change could create significant cash-flow problems for states.
Mr. Westmoreland’s letter was intended to correct a situation in which, he said, there is an increasing number of state plan amendments that are in a pending file because the state has not provided additional information requested by HCFA. Under that announced process change, HCFA has set a time limit for states to respond to its requests for additional information. If states don’t respond within 90 days, the agency will start disapproval action on the amendment.
In his letter, Mr. Westmoreland wrote that the number of pending amendments exceeds 300. In the past, while HCFA has had a 90-day period in which to act on a plan amendment by approving, disapproving, or seeking additional information, states have had an indefinite time in which to respond to information requests. Often, Westmoreland wrote, a state draws down FFP while its amendment requests are in pending status. Once the state finally responds, HCFA again has 90 days in which to make its determination. If the agency does not act within the set time period, the state may assume that the amendment is approved.
Mr. Westmoreland said the backlog of hundreds of amendments for which new information is being sought creates a number of problems.
"The complicated process of trying to determine which plan pages precede the new pages often hampers our review of new amendments," he wrote. "Problems arise when states make efforts to resolve older pending amendments because expertise on the older amendments is often lost due to staff turnover. Further, states are at risk of lawsuits from providers as they are operating under a state plan that is not yet approved." he stated. "Finally, should a plan amendment be ultimately disapproved, the law requires HCFA to recover all funds drawn down under the amendment, which may be potentially large sums of money for unapproved services."
He added that setting a time limit for state action was in the best interest of the states, the federal government, and the public by assuring that all plans are acted on in a timely fashion. "Under our new procedures for timely resolution of these amendments," Mr. Westmoreland said, "we do not believe this will generally be a hindrance to drawing FFP. However, this will prevent us from advancing funds on pending amendments that may be subsequently disapproved."
But state officials see a major problem arising. Mr. Parrella says Connecticut and many other states regularly file plan amendments after their legislatures approve changes in reimbursement methodology for hospitals or nursing homes. "There can be millions of dollars involved in these changes, and, in the past, we’ve always assumed that if we followed the proper notice requirements and submitted a state plan amendment that is approvable, and almost all of our amendments are approved, then we could draw down FFP as we file our monthly claims during the 90 to 120 days it takes to get the amendment approved. For example, our nursing homes could be drawing down $200 million to $250 million every quarter. If they have to wait one or two quarters before they can get that money, that could be a big cash-flow problem. And it would be much worse in larger states. Even if they borrowed in anticipation of getting the FFP, there would be a significant interest cost to be paid," he explains.
"Historically, it has not been federal policy to hold FFP. Just about every year we’ve filed plan amendments for the hospital and/or nursing home section, and we’ve never had to wait to draw down FFP. In the unlikely event that a plan amendment is not approved, we negotiate a change and HCFA goes back to adjust the claims," adds Mr. Parrella.
The National Governors Association and the National Association of State Medicaid Directors have expressed concern about the letter to Tommy Thompson, new Health and Human Services secretary.
A letter from the governors said the change "represented a major shift in federal policy without any consultation with the states" and asked Thompson to "move swiftly to prevent significant loss of state flexibility and sovereignty." The governors also asked for review of other last-minute Medicaid director letters from the Clinton administration and final regulations issued on Medicaid managed care, the state Children’s Health Insurance Program, and Medicaid upper payment limits.
The Medicaid directors and the American Public Human Services Association said in their letter that while the directors had had an informal discussion with Mr. Westmoreland about the desirability of clearing the plan amendment backlog, "the final policy set forth in this letter was developed without input from the states. Some of the issues we have identified may be easily resolved with further
clarification; others probably require a revision of the policy."
They also asked that the Jan. 2 letter be withdrawn until there is an opportunity for the HCFA staff and the Medicaid directors to discuss the issue and devise a process that is effective and equitable for HCFA and the state Medicaid programs.
Mr. Parrella says that while the association executive committee has usually met with Mr. Westmoreland quarterly to discuss issues and concerns, there had been no such meetings since July, partly because of the coming change in administrations after the protracted November general election.
"It’s taking longer than in past years for the new administration to get to their second- and third-tier appointments. This isn’t the only issue out there. During the last two weeks of the Clinton administration, we were getting Medicaid directors daily and sometimes more than one a day. I’ve been ignoring a lot of them so far. Are those letters the policy of the Bush administration? Who knows?" he adds.
HCFA spokeswoman Joyce Winslow tells SHW that HCFA considers the requirements of the letter to be in force at this time.
[Contact the National Governors Association at (202) 624-5300 and the National Association of State Medicaid Directors at (202) 682-0100.]