NCSL Comments on IGT Rule

March 19, 2007

Ms. Leslie Norwalk
Acting Administrator
Centers for Medicare and Medicaid Services
200 Independence Avenue, S.W., Room 445-G
Washington, D.C. 20201

Re: CMS-2258-P

On behalf of the National Conference of State Legislatures (NCSL), I submit the following comments regarding the proposed rule, Cost Limit for Providers Operated by Units of Government and Provisions to Ensure the Integrity of the Federal-State Partnership. NCSL is committed to doing all it can to promote integrity in the federal-state relationship in the Medicaid program. Unfortunately, we believe the provisions proposed in this rule will harm and undermine the federal-state relationship and more importantly will severely handicap the already fragile health care safety net. We urge you to withdraw this rule.

Defining Unit of Local Government (433.50)

The Medicaid Voluntary Contribution and Provider-Specific Tax Amendments of 1991 encroached on traditional state authority in an unprecedented way, by limiting how a state may use its taxing authority regardless of the nexus of the tax to Medicaid. The Medicaid Modernization Act (MMA) includes the “claw back” provision which establishes state expenditures as a line item in the Medicare budget. For better or worse, these are federal laws. This proposed rule would presume to decide for state governments what constitutes a local government unit within its borders. There is no underpinning federal law, despite efforts to assert there is, to support CMS’s effort to: (1) impose a new definition of unit of local government; or (2) to require the entity to have taxing authority.

Cost Limit for Providers Operated by Units of Local Government (447.206)

This rule proposes to require cost-based reimbursement for state and local government providers, despite the fact most providers, in large part due to Medicare’s reimbursement policies, have moved to a prospective payment system. This change in policy will require a significant amount of new reporting requirements that many of our safety net providers (public hospitals, community health centers, school-based clinics and university hospital systems) will find difficult, if not impossible to comply with. The move to a prospective payment system was not an accident. It was adopted to improve efficiency and to provide incentives for cost-containment by participating providers. This move to cost-based reimbursement would seem to suggest that efficiency and quality of services to Medicaid beneficiaries is not as important as the “integrity initiatives” at CMS.

Regulatory Impact Analysis

According to the analysis, the impact of the proposed rule on patient services would be “minimal.” This rule proposes to reduce federal Medicaid expenditures in the last two quarters of FY 2007 by $120 million and by $530 million in FY 2008. It is hard for us to imagine how a $650 million reduction in federal expenditures to these safety net providers over an 18 month period would have only a “minimal” effect on patient care. A number of alternative approaches are briefly mentioned in section D, “Alternatives Considered.” We believe more attention should be given to some of the alternatives mentioned and that perhaps other approaches should be explored. It is also important to note the number of fiscal integrity initiatives already underway regarding Medicaid and the State Children’s Health Insurance Program (SCHIP). Perhaps these efforts should be monitored and evaluated before additional initiatives are undertaken.

In closing, NCSL believes this is the wrong approach. I am concerned about both the short and long-term impact this rule might have on the health care safety net and to the health and safety of some of our most vulnerable citizens. I urge you to withdraw this rule and to continue to work with us and others to support and improve the Medicaid program and to better serve Medicaid beneficiaries. Please contact Joy Johnson Wilson, Health Policy Director at 202-624-8689 or at joy.wilson@ncsl.org if you have any questions or if NCSL can be of additional assistance to you.

Sincerely,

Carl Tubbesing
Deputy Executive Director