January 25, 2002

N.A.C.H.: New Federal Medicaid Rules Threaten State Health Coverage For Low-Income And Disabled Children

ALEXANDRIA, Va. — Ignoring state budget crises across the country and bipartisan congressional opposition, the U.S. Department of Health and Human Services (HHS) today (January 17, 2002) announced new rules that will substantially cut federal funding for state Medicaid programs, which finance the health care of millions of children of low-income families as well as children with disabilities, according to the National Association of Children's Hospitals.

"These rules could not come at a worse time for children's health," said Lawrence A. McAndrews, president and CEO of the National Association of Children's Hospitals (N.A.C.H.). "The new Medicaid upper payment rules will cut billions of federal dollars to the nation's single, largest source of health coverage for children - state Medicaid programs. And they arrive at the very moment that budget crises already are forcing states to reduce Medicaid spending and the number of unemployed, low-income families is increasing." Earlier this year, the administration estimated that implementing its new rules would reduce federal support for state Medicaid programs by $17 billion over 10 years.

More than half of all recipients of Medicaid are children of low-income families or children with disabilities. Medicaid pays for the health care of one in every five children, and one in every four babies. Nearly one in three children with special health care needs also relies on Medicaid for their health coverage. Because children's hospitals strive to serve all children, regardless of economic or medical need, they devote on average more than 40 percent of their patient care to children assisted by Medicaid.

Children's hospitals in many states already are facing Medicaid payment cuts. Across the country, states are struggling under multi-billion dollar budget shortfalls in the wake of economies damaged in the aftermath of Sept. 11. In special sessions in the fall, many state legislatures were forced to address their budget shortfalls by cutting back their Medicaid programs. More states are facing pressures for additional cuts this spring.

Medicaid often is the second largest state program and accounts for as much as 20 percent of a state budget. "HHS' new rules will only exacerbate state fiscal crises," said Mc-Andrews.

Because of the budget shortfalls faced by many states, Congress warned HHS' Center for Medicare and Medicaid Services against implementing the new rules as it left Washington for a month-long recess on Dec. 20.

In its report on the FY 2002 Labor-HHS Appropriations Bill, passed by Congress on Dec. 20, the joint House-Senate conference committee reaffirmed the position of the Senate Appropriations Committee: "The Committee is extremely concerned that eliminating the higher payment limit category compromise struck last year would be disastrous for all safety net hospitals, both public and private, that participate in the Medicaid program." HHS' rules rewrite Medicaid UPL policy, which Congress renegotiated only a year ago in December 2000.

In addition, Rep. Nathan Deal (R-Ga.) and Sen. Blanche Lambert Lincoln (D-Ark.) have sponsored bills (S. 1745, H.R. 3360) that would prohibit HHS from implementing its new rules before 2003 and before it had reported on the projected impact on state economies. In the crush of end-of-year business, Congress did not have time to act on the bills before recessing.

"The nation's children's hospitals strongly urge Congress to enact legislation that blocks implementation of these rules. HHS should not be permitted to implement these changes until Congress has had the opportunity and information it needs to assess their impact at this extraordinary economic time. The future of children's health in more than 14 states, including California, Florida, Georgia, Minnesota, Nebraska, Texas, and others is at stake," said McAndrews.

The National Association of Children's Hospitals (N.A.C.H.) is the public policy affiliate of the National Association of Children's Hospitals and Related Institutions. Representing more than 100 freestanding acute care children's hospitals, freestanding children's rehabilitation and specialty hospitals, and children's hospitals organized within larger medical centers, it addresses public policy issues affecting children's hospitals' missions of service to the children of their communities, including clinical care, education, research and advocacy. Web site: http://www.childrenshospitals.net.

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