State Politics

Feds suggest possible $1 billion in hospital funding to end Florida’s budget standoff

The federal government told Florida on Thursday that it’s likely to provide $1 billion next year to maintain a hospital funding program that’s critical to settling a deadlock that has prevented passage of a new state budget.

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 costs of treating poor patients — a program known as LIP or low income pool.

Tampa General Hospital, All Children’s Hospital in St. Petersburg, Miami’s Jackson Health System and Broward Health are among Florida’s largest recipients of LIP money. Those hospitals combined were promised $731 million in the current fiscal year.

A spokesman for House Speaker Steve Crisafulli, R-Merritt Island, said the House sees the feds’ letter 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.”

The letter said CMS has not made “a final determination on LIP,” but it keeps alive the likelihood of $1 billion in LIP money for next year and $600 million the year after.

The letter arrived at the state Medicaid agency a day after Gov. Rick Scott reiterated his view that “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. But 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 expansion using federal money, and the House and Scott, who 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 that 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 Gov. 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 traditions.”

That’s about $300 million less than the state had hoped to receive, but it’s an optimistic sign.

Gov. 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 on 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 that in future budget years (2016-2017 and beyond), the federal government estimates that Florida would need about $600 million in LIP money. That’s intended to put the state on notice that 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. But 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 healthcare system.”

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