State may have to cut Medicaid payments to fill gap

JEFFERSON CITY, Mo. -- A potential Medicaid policy change could force Missouri lawmakers to cut nursing home payments or look for ways to fill a $92.5 million gap in the budget.

For years, Missouri and about 29 other states have used an accounting gimmick to inflate the federal government's share of Medicaid costs.

The state temporarily transfers money to public entities such as nursing homes. The transfers then trigger matching federal Medicaid payments, which are then transferred back to the states, which use the money however they want. In some cases, the money is spent on Medicaid-eligible programs, triggering even more federal money.

State officials say a federal auditor told them last month to quit using an inflation factor in their creative accounting method. That change could reduce the state's budgeted revenue by $92.5 million this year and $21.5 million next year.

Nearly two-thirds of the state's nursing home residents are on Medicaid, which pays medical bills for the low-income and disabled. The federal government pays 60 percent and the state 40 percent.

While the state can use money gained through the loophole for any purpose, Missouri has been steering much of it to nursing homes. The latest batch of checks totaled $10.3 million and went to the homes Tuesday.

'Responsible and prudent'

That move drew criticism from legislative budget leaders.

Three members of the Senate Appropriations Committee sent Gov. Bob Holden a letter this week asking that the special payments to nursing homes be halted.

"We believe it is only fiscally responsible and prudent to withhold these payments until the extent of the budget shortfall is known," said the letter signed by committee Chairman John Russell, R-Lebanon, Sen. Larry Rohrbach, R-California, and Sen. Wayne Goode, D-St. Louis.

State officials say they distributed the checks because they have received no official "letter of disallowance" from the federal government. Only an informal, verbal warning was issued.

"We don't know the outcome until we get a letter from the feds," said Holden spokesman Jerry Nachtigal. "Once we do, we'll stop the payments if necessary."

One national expert said vague federal policies were to blame for the confusion.

"We set a standard based on how many angels can dance on the head of a pin," Leighton Ku, a senior fellow at the nonprofit Center for Budget and Policy Priorities in Washington, told the St. Louis Post-Dispatch. "The federal government has never said, 'This is the way you count angels.'"