Congress Passes Bill Blocking Reductions in Medicaid Matching Funds

A $161.8 billion supplemental spending bill the U.S. Congress recently passed includes provisions that will temporarily prevent the Bush administration from reducing federal Medicaid matching funds for graduate medical education, or GME.

The provisions were added in response to seven Medicaid rules HHS issued in May 2007; Congress subsequently delayed implementation of the rules for one year. Those rules included a measure that would have stopped states from using federal matching funds for GME. A second measure would have prevented states from obtaining Medicaid matching funds for money spent by public hospitals and institutions, a process known as an internal governmental transfer, or IGT.

The supplemental spending bill, H.R. 2642, (at the THOMAS Web site, type "H.R. 2642" in the search box after selecting "Bill Number") primarily provides funding for the war effort in Iraq and Afghanistan, but it also postpones implementation of six of the seven Medicaid rules promulgated by the Bush administration until April 1, 2009; those six rules include the GME and IGT rules.

If enacted, the measure would save GME programs millions of dollars during the next several months, according to an analysis conducted by the Association of American Medical Colleges, or AAMC. President Bush is expected to sign the bill.

"We are very grateful Congress and the administration have come together to address six of the seven of those Medicaid regulations," said Atul Grover, M.D., Ph.D., assistant vice president for the AAMC. "We are very pleased they realized they need more time to consider any policy changes to GME and IGT issues."

Under current rules, the federal government provides matching funds to teaching hospitals and medical schools through the Medicaid program to help cover the costs of educating and training physicians. If the administration's GME rule had been enacted, it would have cost teaching hospitals and medical institutions about $1.8 billion in federal GME funds during the next five years and possibly more if states had been forced to reduce their own Medicaid GME funding because of a loss of federal matching funds, according to an AAMC analysis. Enactment of the IGT rule could cost teaching hospitals an additional several billion dollars in support during the next five years, the analysis said.

Congress, meanwhile, did not extend a moratorium on a proposed Bush administration rule that would limit the amount of funding states pay for outpatient visits to hospitals and clinics. The AAMC said the rule is intended to "narrow the definition of outpatient hospital services with a resultant payment cut for many important services that are provided in hospital outpatient departments."

The AAMC said the outpatient rule violates the congressional moratorium on further action related to Medicaid GME payments.

The supplemental spending bill also includes an additional $150 million for the FDA for food and medical product safety; $5 million for a study to determine the prevalence of waste, fraud and abuse in the Medicaid program; and $25 million to reduce fraud and abuse.