Review of Medicaid Supplemental Payments to Public Hospital District Nursing Facilities and the Use of Intergovernmental Transfers by Washington State

EXECUTIVE SUMMARY:

This final report points out a method used by Washington to obtain additional Federal Medicaid funds by circumventing the Medicaid requirement that expenditures be a shared Federal/State responsibility. For State fiscal year 2000 Washington made supplemental payments to Public Hospital District (PHD) nursing facilities totaling approximately $147 million, generating about $76.2 million in Federal financial participation. Of the $147 million, $9.8 million (less than 7 percent) was retained by the nursing facilities. Another $10.2 million was redistributed to 3 health-related organizations and the remaining $127 million was transferred back to the State for other uses. The State has, in effect, developed a mechanism to obtain Federal Medicaid funds without committing its share of required matching funds. As in other reports on this issue, we recommended, among other things, that HCFA take immediate action to place a control on the overall financing mechanisms being used by the States to circumvent the Medicaid program requirement that expenditures be a shared Federal and State responsibility. The HCFA concurred and has issued regulatory changes aimed at limiting the amount of supplemental payments available (over a transition period) to State Medicaid programs. We estimate the Federal Government will save $110 million in Washington alone during the transition period.