Review of Medicaid Enhanced Payments to Public Providers and the Use of Intergovernmental Transfers by the State of Nebraska

This final report points out a method used by Nebraska to obtain additional Federal Medicaid funds by circumventing the Medicaid requirement that expenditures be a shared Federal/State responsibility. For fiscal years 1998 through 2000 Nebraska made enhanced payments to public nursing facilities totaling $227 million, generating about $139 million in Federal financial participation. The nursing facilities retained about $1.5 million and $225.5 million was returned to the State for other uses. For the funds transferred back to the State, the State share of the enhanced payments ($88 million) was returned to the Nebraska General Fund and the remaining $137.5 million in Federal matching funds was designated for the Nebraska Health Care Trust Fund. Because the $225.5 million was returned to the State, it appears that the State did not incur an expenditure for which Federal matching funds may be claimed. Among other things, we recommended that the Health Care Financing Administration (HCFA) take immediate action to place a control on the overall financing mechanisms being used by the State to circumvent the Medicaid program requirement that expenditures be a shared Federal/State responsibility. The HCFA concurred and to address the problem has issued new regulations to be implemented over a transition period to become fully effective on October 1, 2008. During this transition period we estimate the Federal Government will save $142 million in Nebraska alone.