Florida's Medicaid showdown gets murkier

Six-hundred million dollars is nothing to sneeze at. But don't underestimate Florida Gov. Rick Scott's ability to say "a-choo!"

The Obama administration on Thursday tossed another complicating factor into an already tangled debate involving Florida's budget and the question of whether the state should expand Medicaid benefits.
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The federal Centers for Medicare and Medicaid Services, in a letter to a top Florida health official, suggested it was willing to give the state $600 million in the coming fiscal year to cover some of the costs hospitals there incur from caring for low-income, uninsured people who can't afford their bills.

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While that's a large sum of money, it's a lot less than the $1.3 billion Scott wants the federal government to kick in for uncompensated hospital costs in Florida—and represents a nearly 55 percent cut in so-called Low-Income Pool, or LIP, funding.

In the following fiscal year, CMS is suggesting it would pay no more than $360 million in LIP funds, which would represent almost a 75 percent cut from 2014's number.

Florida Gov. Rick Scott
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Florida Gov. Rick Scott

The cuts would leave Florida facing a budget hole of hundreds of millions of dollars in the upcoming fiscal year. Medicaid expansion proponents have noted that Florida could fill that hole by agreeing to expand Medicaid coverage to nearly all poor adults, as opposed to limiting it to fewer people, as the state does now. Expanding Medicaid would lead to the state's receiving billions of dollars to cover the costs of insuring the newly eligible.

But uncertainty over the gap, and a disagreement between the two chambers of the state Legislature over whether to expand Medicaid, has led to gridlock over the budget, even as the next fiscal year is set to begin July 1.

Scott has recently said he opposes Medicaid expansion and, in a lawsuit he filed against the U.S. Health and Human Services Department, claimed the Obama administration was threatening to withhold the LIP money as a means to force the state to adopt expansion.

CMS says it is doing no such thing. The agency also said it is unwilling in the future to have the federal government pay for uncompensated care for people who otherwise could be covered through Medicaid expansion.

"CMS is backing up what they've said before, and putting their money—or not—where their mouth is," said Joan Alker, executive director at the Center for Children and Families at Georgetown University's Health Policy Institute.

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"The federal government has put its cards on the table and the state has to act, and I hope for the sake of Florida's heath-care system and hundreds of thousands of people ... that the Florida lawmakers will look at the numbers and do what's right," said Alker, who favors Medicaid expansion.

"You could do the math, it makes a lot more sense from a budget perspective," Alker said, referring to the costs of expanding Medicaid versus the costs of subsidizing hospitals for the uncompensated care they provide.

If the state expanded Medicaid, she noted, it would get between $2 billion and $4 billion in federal funds to cover the costs of insuring newly eligible people through the program in the next fiscal year, compared to the $600 million CMS is now suggesting it will pay for care for uninsured people.

Under a special program since 2006, the federal government has helped Florida's hospitals cover their costs to care for poor, uninsured patients with LIP funding. From 2006 through 2013, the amount of LIP funding was capped at $1 billion per year. The federal government raised its contribution to $1.3 billion in 2014.

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But the federal government has warned Florida that the LIP program could not continue in its current form, particularly since the state had the ability to extend Medicaid coverage to many of the uninsured people whose costs were being covered by LIP. Under Obamacare, the federal government has promised to fund 100 percent of the costs of newly eligible people for the first three years if states expand Medicaid, with that share decreasing over time to no less than 90 percent of costs.

So far, 29 states and the District of Columbia have expanded Medicaid.

Under traditional Medicaid, which in many states had stricter limitations on who could be covered, the federal government more evenly splits the costs of covering enrollees with individual states.

"Coverage is the best way to secure affordable access to health care for low-income individuals, and uncompensated care pool funding should not pay for costs that would be paid for in a Medicaid expansion," CMS wrote to Florida's deputy secretary for Medicaid, Justin Senior, on Thursday.

A spokeswoman for Scott, a Republican, when asked about the letter, said, "We are reviewing it now."

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Scott has expressed fears that the state would incur higher costs by expanding Medicaid, and also has said that he is worried the federal government would renege on its promise to subsidize expansion at no less than 90 percent of costs.

The Obama administration, in turn, has said those fears are unfounded.

The president of Florida's Senate, which has voted to adopt Medicaid expansion, in a reported memo to members of that chamber, said about the letter, "The news brings certainty to what we have known for over a year—the LIP program is changing and Florida needs a new way to address uncompensated care."

Senate President Andy Gardiner, a Republican, wrote, "It remains clear that a sustainable long-term solution is needed. As you are aware, the Senate has proposed a Florida solution that will promote the well-being of our constituents and protect the fiscal health of our state."

House Speaker Steve Crisafulli, also a Republican, said his chamber, which has opposed Medicaid expansion, is reviewing the letter.

A special budget session for the Legislature is scheduled to begin June 1.