New rule tightens Medicaid UPL loopholes - Updata - upper-payment-limit - Brief Article - Statistical Data Included

Healthcare Financial Management, Jan, 2002

The Federal government continues to clamp down on what it regards as loopholes in Medicaid's upper-payment-limit (UPL) provisions, which have enabled states to redirect billions of dollars in Federal matching funds for services unrelated to Medicaid, or even health care. A CMS proposed rule published in the November 23, 2001, Federal Register would limit the amount of Medicaid program payments for services provided by hospitals owned and operated by nonstate governments to the estimated amount that Medicare would pay for the same services. CMS previously had reduced Medicaid rates to 150 percent of estimated Medicare rates in a final rule published in the January 12, 2001, Federal Register.

The January 12 final rule had included transition provisions, which CMS will retain for the new proposed rule. These provisions allow states with long-established programs to take five to eight years to adjust their budgeting, while newer programs will have one to two years to do so. The new proposed rule is expected to cut Federal government payments by $9 billion over five years. Comments were due December 24, 2001.

In related news, the General Accounting Office (GAO) issued a report in October 2001 criticizing CMS for approving four states' applications to engage in UPL budgeting scenarios that violate the January 12 rule. To read the report, Medicaid: HCFA Reversed Its Position and Approved Additional State Financing Schemes, go to http://www.gao.gov, click on "GAO Reports," then click on "Find GAO Reports," and search on report number GAO-02-147.