Benson's Medicaid Gamble

By Josh Rogers on Thursday, May 6, 2004.

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Health and Human Services officials are now holding public forums to discuss the future of New Hampshire's Medicaid program.

The aim is to come up with ways to address the loss of some 100 million dollars in Medicaid money in the next state budget.

But whether New Hampshire needed to take that loss in the first place is an open question.

New Hampshire Public Radio's Josh Rogers has more.

Following the state's Medicaid story is tricky at the best of times, but one fact is unambiguous -- in February Health and Human Services Commissioner John Stephen voluntarily changed the way the New Hampshire charges the federal government for its portion of the state /federal entitlement program. The estimated lost revenues for the state from that one move are at least 45 million dollars a year. Stephen maintains officials at the federal Center for Medicaid Services (or CMS) gave the state no choice: Change the way the state charges the Government for Medicaid reimbursements...

"Or else suffer consequences potentially a 300 plus million dollar restrictions --which would have required some drastic measures -- which is why I must highlight the discussion Governor Benson had and how he fought for the citizens of the state that none of the current program would be affected."

What Stephen casts as Governor Craig Benson's fight on behalf of taxpayers took place last winter, when the Governor went to Washington. He went in search of additional Medicaid money related to nursing homes and other areas. But the Benson administration says federal officials made it clear that if NH wanted to get new funding it would first have to give something up. Governor Benson' top adviser Keith Herman said what Washington wanted first were changes that would cost the state at least 45 million a year. And they wanted the changes to be effective immediately. Herman says he's proud that Governor Benson got them to hold off until 2005.

"We were able to cut a deal with CMS, that maintained NH revenue stream that CMS is determined is illegal -- we've cut a deal to maintain that illegal revenue stream for two years -- that is a deal that no other state has gotten or will get or CMS will allow in the future."

What Herman doesn't stress is that if the state did nothing at all the most it would have lost is 30 million dollars it was hoping to get from Washington this year. Herman says to get that 30 million dollars now, New Hampshire agreed to give up 45 million dollars every year going forward... Now, many states have been locking horns with CMS over Medicaid... Many of them are fighting back, earlier this week the Governor of Kansas sent an angry letter complaining to President Bush. And in the past NH too has pushed back. As close observers of NH's Medicaid program note, there is nothing new in CMS's complaints.

"Washington has known about this for years... there's GAO reports, OMB reports on this."

Doug Hall is co-director of the NH center for public policy studies.

"To crack down on the state of NH and stop this sort of hemorrhaging of the federal Medicaid program is not unique to the current governor or unique to the current situation. What's happened now is that the state has agreed to some of the restriction of this revenue."

The full effect of that agreement remains to be seen. Rochester republican Dick Green is chairman of the state senate finance committee. He believes the Medicaid changes may cost closer to 100 million dollars a year... and says unless the state finds a substantial bolt of new revenue, he has little doubt what Medicaid modernization will mean.

"Part of that whole amendment from where I sit means that they are going to make some drastic suggestions for eligibility requirements which is going to come out of the services to people and the people who are going to suffer are the people who are least able to help themselves."

Concerns over service cuts drive this discussion -- especially since heath and human service Commissioner Stephen says looming revenue gaps make this discussion essential... But this gets at one of the oddest qualities of the Medicaid program. It is well known but often overlooked that over 100 million dollars in medicaid money each year never gets spent on medicaid... The word for this in policy circles is Mediscam and NH and over 35 other states have been doing it for over a decade. It is 100 percent legal and funnels Mediciad money directly into the state's general fund.. Doug Hall of the new Hampshire Center for Public Policy studies points out that it would be wrong to see the loss of Medicaid money now as a reason to cut the program.

"It is not the Medicaid program that no longer has the money to pay for the services --what's missing is the laundered money that was used in the general fund."

According to Benson aide Keith Herman, no one has said that the shortfall has to come out of Medicaid. He also says the state may still get new money out of Washington. But he acknowledges that the feds haven't approved anything yet... and agrees that the administration's strategy could be fairly be called a gamble.

Story Resources
Health & Human Services Medicaid Briefing Paper
State of New Hampshire Information Statement Supplement
NH Center for Public Policy Studies "Budget History and Drivers"
NH Center for Public Policy Studies