Politics & Government

Feds to Florida: State health care will require $1B in 2016

The federal government told Florida on Thursday the state will need $1 billion next year to maintain a hospital funding program at the center of a political stalemate preventing passage of a new state budget -- but officials made no guarantees about how much would be federally funded.

In a letter to state health officials, the U.S. Centers for Medicare and Medicaid Services said the $1 billion would "maintain stability while the system transitions" to new ways of compensating hospitals for the high cost of treating poor patients as the federal government phases out the current funding system known as the low income pool.

Health care funding caused a breakdown in the Legislature last month. A special session is set to begin June 1 to pass a budget.

Miami's Jackson Health System, Broward's Memorial Healthcare System and Broward Health, Tampa General Hospital, and All Children's Hospital in St. Petersburg are among Florida's largest recipients of LIP money. In the current year, those hospitals were promised a total of $731 million in supplemental payments, provided through a blend of federal and local tax money that totals nearly $2.2 billion.

In their letter, the feds did not promise any LIP money. The letter said CMS has not made "a final determination on LIP."

Speaking on background, an official for the U.S. Department of Health and Human Services said the current funding formula used to pay for Florida's Medicaid program will be applied to the state's need for supplemental hospital funding through LIP. The federal government now contributes about 60 percent of the cost of Florida's Medicaid program and the state contributes about 40 percent.

Under that scenario, the federal government would not provide more than $600 million for the state's LIP program next year, and no more than $360 million in subsequent years as the state seeks to reform its hospital payment system.

But a spokesman for House Speaker Steve Crisafulli, R-Merritt Island, said the House views the news as a "clear indication (that) Florida will receive a significant level of LIP funds, which will help us in our efforts to finish the budget by the July 1 deadline."

Senate President Andy Gardiner, R-Orlando, told senators that the news is further proof that a form of Medicaid expansion is the right solution.

"It remains clear that a sustainable long-term solution is needed," Gardiner told senators. "As you are aware, the Senate has proposed a Florida solution."

The letter arrived from CMS at the state Medicaid agency a day after Gov. Rick Scott reiterated his view: "The Obama administration is walking away from a health care program for low-income families."

Scott included $1.3 billion in LIP money in his January budget proposal. When the feds balked at renewing it, he sued the Obama administration, claiming it used LIP money to coerce Florida into expanding Medicaid, a form of insurance for low-income people run by states and funded largely by the federal government.

In its five-page letter, CMS also tries again to nudge the state toward Medicaid expansion, the other issue that has forced an extended political stalemate in Tallahassee between the Senate, which favors a form of health care expansion using federal dollars, and the House and Scott, both of whom oppose it.

"The option to expand Medicaid to low-income adults remains available to the state, and as described later in this letter, could provide an estimated revenue increase of $2 billion annually to the Florida hospitals over and above funding through sources such as the LIP," wrote CMS director Vikki Wachino, who added: "The decision about whether or not to expand Medicaid is a state option, as we have noted previously."

The letter to Justin Senior, Florida's Medicaid director in the state Agency for Health Care Administration, says the U.S. government intends to phase out LIP funding over the next few years to give the state time to implement a new coverage model.

CMS' letter follows a meeting May 6 between Scott and U.S. Health and Human Services Secretary Sylvia Burwell in Washington, which came after Scott sued the federal government.

Wachino wrote: "We have preliminarily concluded that the 2015-2016 funding should be at approximately $1 billion ... to maintain stability while the system transitions."

That's about $700 million less than the state had hoped to receive, but it's an optimistic sign.

Scott and the Senate had no immediate reaction to CMS' letter.

While the latest action by Washington does not include a guarantee of money, the feds appear to be moving closer to a resolution at a time when the uncertainty of LIP money is a major factor in a long-running political impasse that has led to a breakdown in Tallahassee.

The impasse has delayed the start of annual House-Senate budget negotiations and led to the House's decision to prematurely adjourn April 28. It also prompted Scott to direct state agencies to prepare for a government shutdown if no budget is in place by July 1.

In its letter, CMS advises Florida in future budget years -- 2016-2017 and beyond -- the federal government estimates Florida would need about $600 million in LIP money. That's intended to put the state on notice it needs to create an alternate financing arrangement to compensate hospitals for the cost of charity care.

CMS also wants Florida to increase payment rates to Medicaid providers.

At the feds' urging, state officials submitted a proposal to revamp the LIP program last month. CMS expressed concerns, chiefly that Florida was trying to use the federal money as an alternative to expanding its Medicaid program.

While the state Senate included a plan to accept federal Medicaid expansion money in its budget proposal, House Republicans and Scott opposed it.

Federal officials have said they will consider the state's bid to extend LIP separately from any Medicaid expansion plan, but Thursday's letter from CMS makes it clear that the agency favors expansion, which it says would result in "significant benefits to low income Floridians and the Florida health care system."

Times/Herald staff writers Michael Auslen and Kathleen McGrory contributed to this report.