Review of the Commonwealth of Pennsylvania's Use of Intergovernmental Transfers to Finance Medicaid Supplementation Payments to County Nursing Facilities

EXECUTIVE SUMMARY:

Under current Medicaid law, States can establish payment methodologies that allow for enhanced payments to non-State owned government providers, such as county nursing facilities. This final report points out that Pennsylvania is not using this provision for such purposes. Instead, Pennsylvania used the program as a financing mechanism designed solely to maximize Federal Medicaid reimbursements, thus effectively avoiding Medicaid's Federal/State matching requirements. Since Fiscal Year 1992, the State has generated $3.1 billion in Federal matching funds without any corresponding increase in services to the Medicaid residents of county nursing facilities. Further, in the last 3 years a significant percentage (about 21 percent) of the FFP generated was not even budgeted for Medicaid purposes, and another 29 percent remained unbudgeted and available to Pennsylvania for non-Medicaid related use. We recommended that the Health Care Financing Administration move quickly to place a control on the overall financing mechanisms being used by States to circumvent the Medicaid program requirement that expenditures be a shared Federal/State responsibility, and that the enhanced funding be used for the direct health care benefit of Medicaid patients in county nursing facilities. The HCFA concurred and is taking action to curtail this problem.